What Happens if I Can’t Pay My Bills? 6 Vital Steps to Take

What Happens If I Can't Pay My Bills?

Life is often full of surprises and with that uncertainty comes financial ups-and-downs as well. Emergencies can pop up and ruin your budget or make your savings account run dry. These hard times can be attributed to unemployment, a financial emergency, a big change in your personal life, like a job or a divorce.

And unfortunately, your bills still have to get paid. Because of this you could find yourself in a tough spot financially.

So what happens when you get down on your luck and can’t pay your bills? Use these quick steps to get your money back on track

Step 1: Face Your Issue Head On

In other words, resist the urge to bury your head in the sand and ignore your problem. No matter how tempting, ignoring the bills that are piling up isn’t the solution. You’ll end up with even higher late fees, interest charges and a ding on your credit report.

Not facing your financial problems won’t make your situation better and, in fact, will put you in a much worse state than when you started. Make a choice to take action and face your issue head on today.

Step 2: Make a List of Your Bills and Amount

In order to get an accurate picture of your financial standing, you’ll need to make a list of all your accounts, bills and the balances you owe. You can use a simple method like pen and paper or even a spreadsheet.

Be sure to include all past-due accounts, including credit cards, mortgages, auto loans, utility bills, student loans and insurance payments. Once you’ve listed out all your accounts, add them up to get the total balance. You might also want to include the contact info for each financial institution so you can quickly and easily contact them.

Step 3: Contact the Institutions You Owe

After you have the full snapshot of your situation, it’s time to contact creditors and plead your case. With many smaller banks and financial companies you can call them directly to explain your situation. Many times they will give you an extension on your payment or offer other helpful options.

Likewise, with larger institutions, if you explain the details of your issue and ask for options, they will offer help. Remember, they would likely rather help you out of this mess than lose you as a customer, so they will probably hear you out and be flexible with you. Good communication and honesty are key!

Additionally, once you’ve come to a mutual agreement with your creditor, be sure to get any agreements and payment plans in writing and keep them for the duration that you have the accounts. This will ensure you avoid any misunderstandings or issues in the future.

Step 4: Use Your Skills to Make Extra Money

What can you do right now to make some quick cash? Can you host a yard sale to sell some extra stuff around the house? Can you take on a weekend project to bring in some extra money?

Check and see how much extra coins you have lying around the house. Do whatever you can to make some extra money to pay your bills off as quickly as possible. And then continue working hard over the next few months (by taking on overtime at work, or even finding a second job) so you can dig yourself out of this hole.

Step 5: Prioritize Your Bills

If you’ve gone through each of these steps and still find that you can’t pay a few of your bills it’s time to prioritize them. Pay the most important bills first, like electricity, water, gas, and push the other ones off to the side.

Mark any secured debts as next up on the list. These are debts like your car loan and mortgage, since they are assets used as collateral for the loans. If you default on these you’re likely to lose those assets.

Last on the list are unsecured debts like credit cards and personal loans. Once all your other essential debts are paid, you can put any extra funds towards these balances. But you want to be sure your needs are taken care of before you pay these bills, as they have the least amount of consequences attached to them.

Step 6: Develop a Plan for the Future

You don’t want to get stuck in the cycle of not being able to pay your bills, so once you get back on your feet it’s time to develop a solid financial strategy going forward. In addition to increasing your income, try using a free debt reduction tool like ReadyForZero to create a custom plan.

There are multiple strategies you can use to pay off your debts to create more workable income for your family. By utilizing these debt tools you can narrow down the best one for your financial situation.

Then with the help of these tools you’ll get an overall picture of your financial health, as well as help you understand where to start. As I mentioned, always start with your most vital bills and debts first, then work your way down.

If you’re feeling overwhelmed or completely out of control after you’ve taken the above steps, it’s time to ask a professional for help. The best place to start is right here with ReadyForZero. We can help you take the next steps to get back on track.

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Not Paying Your Bills Isn’t the Worst

Not being able to pay your bills may sound like the end of the world (or at least your world) but it’s something we all have to deal with from time to time. Don’t get discouraged or feel bad that you’ve fallen on hard times recently!

Like the saying goes, “when it rains it pours” and that’s just how life goes. But you can use these steps to regain control and get ahead of your situation for good.

Image credit: wavebreakmediamicro

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  • http://thebrokeandbeautifullife.com/ Stefanie @ brokeandbeau

    The worst is when people just ignore and hide from their bills. Creating a plan of action, though sometimes scary, is much more empowering.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Yes, taking action is the most important thing! Even when it feels scary. Thanks for your comment, Stefanie.