Destroy Your Debt

Help! I Can’t Pay My Bills. What Should I Do?

cant pay bills

It can happen, hopefully not often, but it can. I’ll tell you what to do when you can’t pay bills so a bad situation isn’t made worse.

I’m not going to tell you to sell some stuff or to sell your plasma or to get a part time job. This is to help you when you have done all of that, exhausted every legal option and you still come up short.

One piece of advice applies to all of these situations. Start making calls to your creditors. I know this is hard and anxiety inducing. I get some strange dread anytime I have to talk on the phone, even if it’s for something simple and quick like making a hair appointment.

I think because for so long (or for always for some of you) we haven’t had to talk on the phone that much. We can text, e-mail, Tweet, Snapchat, Seamless, whatever else people do now days that means they don’t have to actually make a phone call. But not making these calls will make that anxiety and the situation one hundred times worse.

This is also general information. It varies by state and by lender so if you find yourself in any of these situations, find out the specifics.


Not being able to pay your mortgage is a frightening thought. We all heard terrible foreclosure stories that came out of the 2008 crash. But you have time and you can get help.

What Will Happen?

Foreclosure is a scary word. But missing one mortgage payment is unlikely to result in that. Mortgages are usually due on the first of the month. You have a grace period until the 15th. Your mortgage will be in default if a payment is 30 days late. You will receive a demand letter after your payment is 45-60 days late.

How Fast Will It Happen?

It’s a long process and varies by state. Foreclosure doesn’t typically begin until you are 120 days late. It can take anywhere from a few months to three to four years. The foreclosure process stops if you bring your payments up to date.

If there is any good news in this situation, it’s that you can stay in your home during the process in most states. Here is a summary of foreclosure laws by state. This gives you so breathing room to decide how to best move forward.

What Can You Do?

The federal government started two programs in the aftermath of the 2008 housing market crash to help homeowners struggling with mortgage payments.The first is HAMP, home affordable modification program. HAMP is for those who have already missed payments and are in danger of foreclosure. This program will modify your mortgage payment so that it’s no greater than 31% of your gross monthly income.

HARP, home affordable refinance program, helps those who have not yet missed a payment but are in danger of doing so and cannot refinance because they have little or no equity in their home. HARP can lower your interest rate, change your mortgage from adjustable to fixed rate and there is no minimum credit score requirement.

What Are The Consequences?

They aren’t good. Even one late payment can drop your credit score as much as 100 points. If the worst happens and you lose your home, renting with poor credit and a foreclosure on your record will be difficult. You will also be racking up fees. Late fees of course and often, additional fees for “default related services.”

You may also have tax problems. The IRS considers unpaid debt to be income, including mortgages in some cases.

Car Payment

Some of us depend on our cars to get to and from work. Missing even one car payment can have swift consequences, including the inability to get to work to make money during an already dire situation.

What Will Happen?

You’ll start getting calls from the lender. Why are you late? When can you pay? This is the time to explain the situation and see if they are willing to work with you.

How Fast Will It Happen?

A missed car payment may have more immediate consequences than a missed mortgage payment. Some lenders will repossess your car after just one missed payment so it’s especially important to call them when you know you can’t pay.

What Can You Do?

You may be able to refinance the loan if you have good credit. You can ask for a modified payment, to lower the amount you owe monthly or get a short term deferment so you won’t have a monthly payment for an agreed upon time.

You can try to sell the car or turn it over to the lender. You will still be responsible for the difference between what the car is worth and what you still owe on the loan. If the worst happens and the car is repossessed, you still have the right to any personal belongings that were left in it.

What Are The Consequences?

You may be assessed the late fees and costs of repossession and the delinquency will likely be reported to the credit bureaus, damaging your credit score.

The loss of the car can start a chain reaction. If you can’t get to work, you can’t make any money and you might be fired. If you can’t make money, you can’t pay your other bills either. While the specter of a home foreclosure seems scarier, losing your car may be the worst thing on this list.

Student Loan

Forty million of us have them and seven million of us are in default so if you get behind, you’re in good, or at least plentiful company.

What Will Happen?

I am guilty of being late of student loan payments a looooong time ago. I don’t ever remember getting a call. It may be a case of giving us the rope to hang ourselves because student loan lenders are almost never going to end up on the hook for a bad debt.

If we’re feeling charitable, it could be because loans are passed from one servicer to another and sometimes things get lost in the shuffle. So if you aren’t organized, it might not be that you didn’t have the money to pay but that you sent the payment to the wrong place and don’t know it.

How Fast Will It Happen?

A loan is considered delinquent the day after the due date. Most federal loans are in default when 270 days late.

What Can You Do?

So many of us have student loan debt that it is probably the easiest on this list to get help with. They can’t throw all forty million of us into debtor’s prison if things go wrong so there are lots of programs to help us if we get into trouble.

You have three options; you can change your repayment terms. This option will lower your monthly payment based on your monthly income. You can consolidate your loans through a company like SoFi. Consolidating will simplify things, you won’t be making several payments to several processors, and will lower your interest rates. The third option is to put your loans into forbearance. This will suspend payments entirely for an agreed upon amount of time.

What Are The Consequences?

You’ll have the usual late fees and ding on your credit report. But a defaulted student loan probably has the worst very long term consequences. Unlike most consumer debt, student loans cannot be discharged in a bankruptcy in all but a very small set of circumstances. So defaulted student loans can literally haunt you to the grave.

Credit Cards

Sneaky, wicked devils. It’s so easy to get into trouble with these. To the uninitiated, a new credit card can seem like free money.

What Will Happen?

You have a bit of a grace period for late credit card payments, at least 21 days for new purchases. There is often no grace period on cash advances or balance transfers. So you have a bit of breathing room here before things go south.

How Fast Will It Happen?

Late charges can start racking up fast here. If you’re even a day late, you might be charged a late fee ranging from $25-35. Your card may also be cancelled and you might only find out when you try to use it. Closing an account is at the discretion of the credit card company.

What Can You Do?

Call as soon as you know you won’t be able to pay and ask what is typically done in this situation. The rep may be able to extend your due date which will give you some time to come up with the minimum payment. Unlike most of the other things on this list, you can keep your credit cards out of default by paying a minimum.

While you have someone on the phone, ask if they can lower your interest rate. After 6-7 months of non-payment, your debt may be charged off and sold to a third party debt collection agency.

What Are The Consequences?

You’ll get the usual late charges. After 60 days your interest rate may increase to the default or penalty rate, the late payment will be reported to the credit bureaus lowering your score and leaving a black mark on your credit report.

After 6-7 months of non-payment, your debt may be charged off and sold to a third party debt collection agency. These kinds of collectors are much more aggressive than dealing with a credit card company. You have certain rights, but not everyone is aware of them and these bottom feeders know that and will push the envelope. It will be a much less unpleasant experience if you can keep the debt with the originator.

You Almost Always Have Options

It’s distressing when you can’t pay bills but you almost always have some options. The important thing is to reach out to your creditors at the first sign of trouble. Ignoring the problem until the angry calls and letters start is the worst thing you can do.

Most creditors want to work with you because it’s less hassle than chasing you for the money and they get more money back when they do. If the creditor discharges debts to a third party source, they may only recoup pennies on the dollar.

Remember too that there is a lot of help available when you can’t pay bills. Special programs like the mortgage ones we talked about, several options to lower your monthly student loan payments, and credit counseling services to help with credit card debt. Auto loans are probably the ones you have the fewest options for and has the most immediate consequences since a car can be repossessed much more quickly than your home.

Don’t be afraid to ask for help and use this as the wake up call to get your finances in order. None of this happened overnight, even if your circumstances did change over night. A job loss will have less impact on your finances if you have an emergency fund in place. Keeping your spending in check means you aren’t racking up credit card debt.

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