| Gary Foreman is a former Certified Financial Planner (CFP) who currently writes
about family finances and edits
The Dollar Stretcher website
http://www.stretcher.com. You'll find hundreds of FREE
articles to stretch your day and your budget! |
Gary,
My husband has been out of work for 5 months and the income he did
bring in when he was working was double what I currently bring in.
Needless to say, my checks and the unemployment is not paying the
bills. I am starting to panic because bill collectors are calling
daily. I cannot tell them when I can make payments so they
continuously call at home and work. I feel like I am going to lose
my mind because of this! I am making sure that my house payment is
paid, utilities, car insurance, but everything else is getting
severely behind. What do I do? Do we have any way of getting out of
this mess? Any rights?
--SS in WA
Sounds like SS is in a tight spot.
We'll spare SS the obvious advice of cutting unnecessary costs.
Let's rather focus on how to handle the mountain of bills.
First, it's important to get some
breathing room. SS won't make good decisions if she's losing her
mind! Begin by asking the collection agencies to stop calling you.
Do it in writing. Use a postal method that proves that your
correspondence was received. Bill collectors are required by federal
law to stop calling you if you ask them.
Second, estimate how long the
situation will last. Are you looking for a one month solution? Or
one that will work for one year? Estimating will mean honestly
evaluating hubby's job prospects. Is it realistic to expect him to
find a similar paying job in your community? If not, you'll need to
make some decisions. Would SS be willing to move to another area and
give up her job to replace his lost income? In any case, you'll need
some estimate of when income should increase.
This may be a good time to evaluate a
change in career paths. Sometimes happiness is found in a
lower-paying, but less stressful career.
Third, SS will want to inventory
their bills. How much does it cost each month for the basic
necessities? Thankfully, it appears their current income covers the
basics.
She'll want to look at her bills with
an eye towards reducing or eliminating them. Start with the biggest
ones: the mortgage and any car payments.
 SS should check to see if they have
credit insurance that could make payments until hubby is employed
again. Many consumers forget that they even have it. A simple call
to your creditor can tell.
Consider refinancing your home. Not
just for a lower rate of interest, but also to stretch out the term
of the loan. The longer the loan the lower the monthly payment.
SS may also want to use the equity in
her home to pay off some debts. Especially ones like credit cards
that are charging very high rates of interest.
Try to negotiate a new loan on your
car. Either your current lender or another may be willing to allow
you to finance the car over a longer period of time.
SS may find that it's best to either
sell or even let one car be voluntarily repossessed. A repo could
leave her owing money after the car is sold, but at least the
monthly payments and cost of insurance would disappear.
Now on the smaller monthly bills. SS
needs to make a list of all of the bills with the monthly minimums
and the interest rate being charged.
Contact the people that you owe
money. Begin with the biggest bills. Explain the circumstances and
offer to pay what you can. Before you contact them know how much you
can realistically afford to pay each month. Do not make promises
that you won't be able to keep.
SS may find that even after talking
to her creditors that she can't cover all the monthly minimums. That
leaves her with a few choices. One, pay some minimums and let other
accounts go unpaid until after hubby returns to work.
A second option would be to work with
a debt management firm. Often they can get creditors to reduce
minimums and interest rates. Usually late fees will be waived. Talk
to a couple of companies before choosing one. Ask them to explain
what they can do for you and what you'll be charged for the service.
A final option is to declare
bankruptcy. If job prospects are poor and you simply can't keep up
with the minimum payments a bankruptcy could be inevitable.
All of these choices will leave marks
on your credit history. That can't be helped when you fail to pay
bills. It may take up to 10 years before your record is completely
clean. But the road to recovery will begin as soon as you take
control of the situation and begin making payments at an agreed
rate.
Let's all hope that SS's husband
finds a great job real soon.
--End--
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