What to Do If You Can"t Pay Your Debt
Every day, many people sit at the table staring at a stack of bills they simply cannot afford to pay.
Some don't even have to open the envelopes to know it's just another creditor asking for money.
It's easy to get in over your head with debt, but much harder to find a way out of debt.
When you can barely afford to pay your debt, it's time to make some crucial decisions.
Prioritize You will want to ignore your debt.
If you just ignore it, it's not like it doesn't exist.
You can bury your head, but all around you, fees and interest are building up.
By the time you finally face your debt, it will be much more overwhelming.
Face your debt instead of pretending that it does not exist.
Make a list of all your outstanding debts and other expenses and then prioritize them.
Decide what you can afford to pay and what you must have to pay to stay afloat.
For example, you should prioritize your mortgage above credit card payments if you want to avoid foreclosure and homelessness.
Squeeze As Much Money As You Can If you had just one lemon to make a pitcher of lemonade, you would squeeze that lemon until it was completely dry and maybe even scrape some of the pulp to give your lemonade more flavor.
Think of your income the same way.
You can't necessarily add more money to your paycheck (unless you go for a raise or get some overtime), but you can make the most of your paycheck by cutting out unnecessary spending.
Eat less.
Drive less.
Use less electricity.
Make sure your tax withholding is accurate, especially if you get a refund check each year.
Cut back on your cell phone plan - or get rid of it completely.
Stop your cable service.
Look for every possible way to have more money.
Try to Make at Least the Minimum Payment You can save yourself a ton of penalty charges if you can at least make the minimum payment on all your debts each month.
Once you get behind, it's much harder to get caught up.
Make the minimum payments at least until you can do something to increase your income.
While minimum payments won't help you pay off your debt quickly, they do keep you away from charge-offs and collection activity.
If you have accounts that are already in default or with a collection agency, pay attention to those later.
Focus on the accounts that are in good standing or at least salvageable.
Call Your Creditors You may be able to get on your creditor's hardship repayment plan, which would temporarily reduce your interest rate and monthly payment.
If you can't negotiate a lower payment right now, try again in another 30 days; some creditors only offer these plans to consumers who are delinquent by a certain amount of time.
Worst case scenario, if you can't reduce your payment, your creditor's system will at least show that you made a good faith attempt to stay in contact about your debt.
Continue to reassess your debt situation every month.
Don't rule out bankruptcy as a solution if your income or expenses continue to keep you unable to pay your debts each month.
Some don't even have to open the envelopes to know it's just another creditor asking for money.
It's easy to get in over your head with debt, but much harder to find a way out of debt.
When you can barely afford to pay your debt, it's time to make some crucial decisions.
Prioritize You will want to ignore your debt.
If you just ignore it, it's not like it doesn't exist.
You can bury your head, but all around you, fees and interest are building up.
By the time you finally face your debt, it will be much more overwhelming.
Face your debt instead of pretending that it does not exist.
Make a list of all your outstanding debts and other expenses and then prioritize them.
Decide what you can afford to pay and what you must have to pay to stay afloat.
For example, you should prioritize your mortgage above credit card payments if you want to avoid foreclosure and homelessness.
Squeeze As Much Money As You Can If you had just one lemon to make a pitcher of lemonade, you would squeeze that lemon until it was completely dry and maybe even scrape some of the pulp to give your lemonade more flavor.
Think of your income the same way.
You can't necessarily add more money to your paycheck (unless you go for a raise or get some overtime), but you can make the most of your paycheck by cutting out unnecessary spending.
Eat less.
Drive less.
Use less electricity.
Make sure your tax withholding is accurate, especially if you get a refund check each year.
Cut back on your cell phone plan - or get rid of it completely.
Stop your cable service.
Look for every possible way to have more money.
Try to Make at Least the Minimum Payment You can save yourself a ton of penalty charges if you can at least make the minimum payment on all your debts each month.
Once you get behind, it's much harder to get caught up.
Make the minimum payments at least until you can do something to increase your income.
While minimum payments won't help you pay off your debt quickly, they do keep you away from charge-offs and collection activity.
If you have accounts that are already in default or with a collection agency, pay attention to those later.
Focus on the accounts that are in good standing or at least salvageable.
Call Your Creditors You may be able to get on your creditor's hardship repayment plan, which would temporarily reduce your interest rate and monthly payment.
If you can't negotiate a lower payment right now, try again in another 30 days; some creditors only offer these plans to consumers who are delinquent by a certain amount of time.
Worst case scenario, if you can't reduce your payment, your creditor's system will at least show that you made a good faith attempt to stay in contact about your debt.
Continue to reassess your debt situation every month.
Don't rule out bankruptcy as a solution if your income or expenses continue to keep you unable to pay your debts each month.
