Sometimes life happens. You lose your job, you lose a loved one, or you get sick (mentally or physically) or become disabled. And sometimes, these life events cause us to not be able to afford our expenses. If you’ve exhausted all options, but still can’t afford your cost of living, there is still hope. Here’s what to do when you can’t pay your bills.
What To Do When You Can’t Pay Your Bills
There are a few steps that you should take when you can’t pay your bills.
These steps will:
- help you avoid being sent to collections,
- possibly avoid extra debt, and
- get yourself together so you can move forward.
1) Prioritize Your Bills
First things first, what needs to be paid right now?
A phone bill or subscription service isn’t as important as your mortgage. You can even go without health insurance for a while (this should be one of the last non-essentials to pay, but still not technically essential). But what you can’t do is starve yourself or be homeless.
So, make sure your four walls are set up.
Your four walls are:
- your home,
- clothing, and
Your four walls may be slightly different, but in reality, these four walls are the things you need to have in order to live and be a part of society.
Look at all your bills, see what can be canceled and downgraded, and also see what is the most pressing to be paid. For example, if you’re behind on rent or your mortgage, you may need to pay that before you can focus on anything else. If you don’t want the possibility of being evicted, that would be your first priority.
2) Call Your Creditors
Once you’ve decided on what’s most important to pay, now is the time to call the people you owe. Again, you first need to start with your top priority bills.
- Call the companies,
- ask for either an extension or grace period, and then
- see if you can set up a plan or get a reduced cost.
- Explain your situation to them, and be kind.
Yes, creditors can be terrible companies to work with sometimes. But typically, they want to help, because they want you to be able to pay them now and in the future.
This really comes in handy if you’ve never been late on a payment before or have a long history with them. Don’t be scared to hype that up either. If you’re always paying on time or have been with the company for years, that could actually work in your favor.
If you’re nice, make a plan to pay back what you owe, and give them details (like telling them about a job loss), many companies will be willing to work with you. Call everyone on your list to see what they can do for you.
Once you’ve gotten your priority payments together, you may be tight on cash. But all hope is not lost. There are many programs, non-profits, and charities to help you get back on your feet until you can afford to do better.
For example, if you lose your job, you may qualify for:
- SNAP benefits, and even
- WIC (if you’re a parent).
These programs can help you feed yourself and your family so you can focus on paying your bills. You may also qualify for longer-term programs like Medicaid or Low-Income Housing.
If you don’t qualify for any government programs, you can still utilize non-profit programs like:
- soup kitchens,
- food pantries, and even
- low-cost medical offices.
Some non-profits even help you pay bills like rent and electricity for a month or two until you’re back on your feet.
You can’t catch up with bills if you die or become homeless, so don’t be afraid to use these programs. That’s what they’re there for.
Related: Free Debt Snowball Calculator
4) If All Else Fails; File For Bankruptcy
I know, bankruptcy should be the last resort. But let’s be honest, sometimes, you just can’t dig yourself out of the hole that you’re in. And while bankruptcy won’t solve all of your problems, it could give you a sort of “fresh start” in order to get your financial life together.
There are a few things to keep in mind when it comes to filing for bankruptcy.
For one, it can take 7-10 years for a bankruptcy to fall off of your credit report. So, if you plan on making any “big” purchases within those years, you’d need a co-signer at the very least.
It’s also important to note that there are two kinds of bankruptcy, Chapter 7 and Chapter 13.
When you file a Chapter 7 bankruptcy, you’re asking the court to wipe out the debts that you owe. There are some debts that are not dischargeable, so keep that in mind. The debts that don’t qualify are:
- child support, and
- tax liens, among others.
You also may not qualify for a Chapter 7, which brings us to the next option.
If you don’t qualify for a Chapter 7 bankruptcy, you can try filing a Chapter 13.
This bankruptcy means that you set up a plan with the court detailing how you will repay your debts. They will then set up the debts that you need to pay if you need to pay them in full, partial, or at all, and also set up a payment plan, based on your income.
Like I’ve said, this should be your last resort. But, if you really have no other options, filing a bankruptcy could be a blessing in disguise.
In The Future: Budget, Save, and Hustle
I know it may seem like you’ll never catch up, but I promise you, it’s possible. I’ve been in the position where I couldn’t pay my bills, and I’ve followed these same steps (except for bankruptcy). After being in that position, I made a promise that I’d never be in that position again.
Due to that promise, I set up a budget and started to save. It wasn’t much at first, but over time I’ve been able to build a nice savings and nest egg. I’ve also never been behind again.
Once you’re able to catch up and can afford to pay your bills, your next step is to set up a budget and start saving for the future. We never know what the world has in store for us, so we at least need to try and prepare for it. The best way to do that is to know how to manage money and save what we can.
Another way to save and budget is to get a side hustle or start a business. That way, you can bring in more money that you can then save or invest for the future.
Bottom Line: What To Do When You Can’t Pay Your Bills
It’s a tough situation to be in when you can’t pay your bills. But that doesn’t mean all hope is lost. Sometimes, you just need a little help and a game plan. And these steps can certainly help.
Are you ready to get started? Are you ready to dig your way out of this hole? YOU CAN DO IT!
AUTHOR Kimberly Studdard
Kim Studdard is a project manager for online entrepreneurs and small businesses. When she isn't spending time with her daughter and husband, or reading her growing pile of horror books, you'll find her working on her HR degree and working towards FIRE.