When You Can’t Pay Your Bills…

Image result for sticking your head in the sand

You may be tempted to bury your head in the sand!  If so, you’re not alone.

If you’re like many Americans, you may be struggling to make ends meet.  It can be overwhelming to have more bills than you have money.  If there’s just not enough to go around, you may be tempted to ignore bills or credit charges.  In addition to the stress and financial losses, late payments can affect access to future credit for many years.  In this module you’ll learn more about what to do when you can’t pay your bills.

This module takes about 20-30 minutes to complete. By the end of this module, you will be able to…

  • …assess what to do if you’re unable to pay your bills.
  • …negotiate with creditors about payment plans.
  • …determine which bills are most urgent to pay.

Complete the following pre-learning check to test your knowledge. Answer “true or false” to the three statements below. Click on the blue box to find the correct answer.

Many creditors are willing to negotiate a payment plan if you're unable to pay their bills.

True, if you’re unable to pay bills, start by preparing by organizing your bills and figuring out how much you can pay. Then, negotiate with creditors and make payments. Finally, check your free credit report to make sure debt payments are being recorded accurately. You can get your FREE credit report by going to http://annualcreditreport.com.

Creditors or collection agencies can never take money directly from a paycheck or bank account.

False, if a consumer fails to pay a debt, a creditor or collection agency could sue. If this happens the court could enter a judgment that directs a third party, like a bank, to use funds from the consumer’s account to pay the debt. With wage garnishment, an employer withholds part of a consumer’s wages to pay a debt.

When you're behind on your bills, it is a good idea to pay your housing related bills first.

True, while everyone’s situation is different, in general, making sure you and your family have a safe place to live is critical. Therefore, bills related to housing (rent, mortgage, utilities, property taxes, etc.) are often the highest priority.

Overdue Bills

First – don’t ignore them. Although tearing up letters, bills, and financial statements might feel good, it’s not going to help you solve the real problem. In fact, it will make matters worse. If you look to the internet for help, it can be overwhelming. Where do you start?  How do you know which bills to pay first when all the bills are overdue? What options do you have? We’ve put together some information in the links below to help get you back on track. Remember, there are no “quick fixes,” but there are some great resources available to help you take back control. Start with taking the first step!

Second – contact your creditors so they know you are keeping track and doing the best you can. There’s information below about prioritizing which bills are most important to you, along with a sample letter that you can use to send to your creditors. Watch this UW Mindful Money Moment video for tips on working with creditors.

Let’s learn more…

What can happen if you don’t pay your bills

Where to start when you can’t pay your bills

Deciding which debts to pay first

Quick facts on debt collection, judgments, garnishment, and reposession

Sample Letter for Creditors

Getting Through Tough Times

Want to learn even more?

Power Pay – If you want the tools to develop a personalized, self-directed debt elimination plan.

National Foundation for Credit Counselors – If you are going through a financial crisis and would like to talk with an authorized non-profit financial counselor. NFCC-affiliated organizations typically charge for their services on a sliding income-based fee scale and offer services such as setting up a Debt Management Plan (DMP) or negotiating with creditors on behalf of consumers.

CFPB Booklet: Want credit to work for you? Start with these steps.

If you are ready to learn even more, you may find this information from the University Illinois helpful as well: Debt Management and Using your Money Wisely. While you’re there, check out the other money management resources.

Need local resources?

When money is tight, you may qualify for extra help for food, childcare, and healthcare. It’s worth the time to check and see. These sites will help you get started…Resources for Foodshare or Badgercare  and 211 Get connected, Get answers – free and confidential service to help you find the resources you need.

Test your knowledge

Quiz: When You Can’t Pay your Bills Take this 10-question quiz to review the basics and test your knowledge about what to do when you can’t pay your bills. You can take this quiz as many times as you want.

Certificate of Completion

If you’d like to certify that you’ve completed this module, be sure to contact a UW Extension Financial Educator to find out about program requirements.