What Should You Do When You Can’t Pay Your Bills?
February 28, 2009 by Miranda Marquit
Filed under Finance
What happens if I can’t pay my bills? This is a question that many are beginning to ask as the recession continues. After all, job loss is a real issue for many. And, even if your job isn’t in trouble yet, you might wonder what would happen if you couldn’t pay your bills.
Obviously, you should try now to prepare for the future by building up your emergency fund and saving up for expenses. But, just in case, here is what you should do if you are faced with a situation in which it becomes impossible to pay all of your bills:
- Prioritize your obligations. Figure out which bills are most important. Hint: It’s your mortgage. You want to make sure that bills related to your shelter are covered first. Put your mortgage at the top of the list, and follow it with things like heat and electricity. Then add your car loan to the list, and finally your credit cards. Your TV bill, in my opinion, should be at the bottom of the list — it’s something you can cancel if necessary.
- Call your creditors. Let your creditors know as soon as possible that you are having trouble paying your bills. Try to work out a loan modification before you fall behind on your mortgage payment. Take advantage of the foreclosure prevention plan just unveiled by the Obama Administration. You can also call your utility providers to work something out. Additionally, your car lender and your credit card issuers can probably put you on some sort of deferred or reduced payment plan (you may have to have a fee added — and you will have to pay interest) until things improve.
- Know your rights as a consumer. Yes, creditors who aren’t willing to deal can send the debt collectors after you. But you have rights. Debt collectors can’t threaten you with arrest or seizure of property — especially if it unsecured debt. Debt collectors even have to stop calling you if you ask them to in writing. Know your rights as explained in the Fair Debt Collection Practices Act, and don’t give in.
If you start addressing the problem early enough, you can usually get some understanding and help from your creditors and others to whom you have money obligations. Just make sure you explain the situation and make solid efforts to get back on your feet and pay what you owe.
image source: sxc.hu
Some of that is excellent advice but it assumes far too much. The first mistake is to assume that employment can be found in the near future and you can get back on your feet in a fairly short period of time. That probably won’t happen for the majority of Americans unless they have high demand skills. The economy isn’t going to turn around any time soon. Not for at least a couple of years or more. Creditors won’t wait that long. They will take you to court and sue you hoping to get some money now. People who can’t pay and can’t get a job paying more than they were making should start learning how to defend themselves in court. They should also do as you suggest and learn FDCPA and FCRA. That isn’t enough. They also need to learn how to take the debt collectors and lawyers to federal court because that is the only way they can win. They also need to learn how to protect their property and their wages if they still have a job. Protection against wage garnishment and seizure of property is available. People can now get their own Toxic Assets Recovery Program or TARP and they can learn about that from http://toxicassetsrecoveryinc.blogpsot.com and they should start putting their TARP in place before they get sued and garnished. Once that happens it is too late.
I agree that it is important for consumers to know their rights — and be prepared to defend them in court. And, in extreme cases, bankruptcy may be necessary. However, it is also a good idea to find out what kind of assistance is available from state and federal agencies. Food stamps, unemployment, etc., while unable to completely make up for lost wages, can help bridge the gap. And thank you for sharing information about individual TARP. This is another resource avenue to pursue.