What to Do When You Can't Pay Your Bills
Hiding from your money problems won't fix them. If you can't afford to pay all of your bills this month, here's what you need to do to take responsibility for the situation and correct it as quickly as possible (with the least amount of damage to your credit score).
Dump All Non-Essentials
Go over your list of expenses and cancel anything that isn't key to your survival. Cable/satellite, streaming services, newspaper subscriptions, extra phone features, paid memberships – they all need to go until you have your finances back on track.
Try to Earn the Money You Need
Late payments and skipped payments are bad news for your credit score and could cause you to lose your home or car, so make a hard push to earn the money that you need to cover your budget gap. Sell some stuff, pick up a side job, roll coins – do everything in your power to pay your bills on time. There are a bunch of ways to raise cash quickly; see if there are any ideas that you might have overlooked before you decide to go the non-payment route.
Renegotiate Student Loans and Medical Bills
If you're currently paying on student loans or medical bills, you should free up some money by negotiating new repayment terms. Federal student loans can be placed in forbearance or deferment if you're in a tight spot, which will allow you to reduce your payments or to temporarily stop making payments. Medical bills are even easier to renegotiate. Just call the accounting office, explain what you can afford to pay, and they'll usually work with you.
Prioritize Your Bills
If you still don't have enough money to cover your bills, it's time to decide which bills you're going to pay now and which are going to have to wait. Go through your list of monthly expenses, and mark all items that are vital to your existence as a top priority. You should include things like your rent/mortgage, utilities, and insurance. Mark all secured debts as your next priority. This includes things like car loans, home equity loans, and any other debts that have collateral attached to them. Mark all unsecured debts as your last priority. This includes things like credit card debt, personal loans, and most services-related bills. Once you've prioritized all of your bills, make a list of the bills that you aren't going to be able to pay right away.
Talk to Your Creditors
Now, that you've done everything that you can to minimize the damage, it's time to let your creditors know what's going on. Call each one up before your bill is due (not after) and explain your situation. It won't be a fun call, but it could help to keep you out of trouble. Many creditors are willing to offer deferred payments, reduced payments, a late fee waiver or an extended due date if you haven't had a problem in the past – and that can go a long way towards saving your credit score and getting your finances back on track.