I Can't Pay My Bills: What to do & Where to Get Help

I Can’t Pay My Bills

Get help with a free credit and budget counseling session.  Also learn about COVID relief is available for rent, mortgage and student loan payments.

What to Do When You Can’t Pay Your Bills

The coronavirus pandemic has been a stunning reminder to American consumers that anybody can get caught in a financial bind.

Those who lost their jobs or saw their hours – and income – significantly reduced, discovered how quickly they can fall behind without an emergency fund.

While many COVID-19 debt relief programs have expired, there’s still help for those who need it.

COVID Relief for Parents

One of the most beneficial programs for parents is the enhanced Child Tax Credit, which was part of the March 2021 American Rescue Plan. It is not a tax deduction, it’s not an advance on your tax return. It is free money — $3,000 for each child between 6 and 17, and $3,600 for each child under the age of 6. It’s for single parents who make less than $75,000 a year, or couples who make less than $150,000. Beginning in July 2021, parents who qualify and paid 2020 taxes will begin getting monthly checks of $250 for each child for the older child bracket and $300 for the younger bracket. The checks come every month through December 2021. The second half of the tax credit — $1,500 or $1,800, depending on the child’s age – will arrive in a lump sum in April 2022.

Another new feature is that low-income families who didn’t make enough money to file taxes will still get the credit. They must sign up for it at the IRS’ Child Tax Credit Non-Filer Signup Tool.

The IRS estimated nearly 39 million households representing 90% of the children in the United States will get the money. While the enhanced credit is only a one-year thing, a movement is on to make it permanent.

COVID Relief for Renters

The CDC’s ban on evictions for those who can’t pay their rent because of the pandemic was extended until Oct. 3. That said, many states still have millions in rent relief money from their share of federal COVID-19 stimulus bills, and the grant money is good until 2025. If you are having trouble paying your rent, the U.S. Treasury Department has compiled links for all U.S. states, tribal land and territories, to make it easy to find out what the options are in your area.  You can also use a search engine and type in Emergency Rental Assistance to find programs in your area.

COVID Relief for Homeowners

The forbearance program for homeowners whose loans are backed by HUD, FHA, USDA or the VA came with a June 30, 2021, deadline to apply for relief. There is no deadline for those with home loans backed by Fannie Mae or Freddie Mac, but the catch is to get an extension, they have had to have been in a forbearance program as of February 2021. If you are having trouble paying your mortgage, because of COVID-19 or anything else, the best thing to do is to find out who services your mortgage (you can find that information on your bill or online account), and contact them to find out what can be done to help.

The U.S. Department of Housing and Urban Development has programs, set up long before the pandemic, to help people avoid foreclosure.

COVID Relief for Student Loans

Borrowers with federal student loans can skip payments until Jan. 31, 2022. Interest is also suspended. Those who have privately held student loans should contact their lender, but in general loans from Federal Family Education Loan (FFEL) commercial lender may offer interest and payment suspension benefits. Students with a FFEL or Perkins loan, should contact your student loan servicer for more information. If someone asks you to pay a fee to forgive your student loan, it is a scam. No legitimate programs do this.

Step One: Prioritize Your Bills

Some bills are more easily put off than others. Some missed payments can lead to disaster quickly. The key is knowing which is which.

We begin with Psychology 101, specifically Maslow’s Hierarchy of Needs. Laid out in a pyramid, Maslow says needs lower in the hierarchy (food, shelter, rest, warmth) must be met before needs higher up (security, belonging, esteem) can be satisfied.

The same applies to your struggling budget. Look first and foremost to your essentials – meaning food, shelter, utilities — which come before anything else, including cell phone, cable and internet service. That also includes credit scores. They may be damaged as you’re working through this, but credit scores can recover.

Priority One Bills: Essentials

Food: Whatever else, you must feed yourself and your family.

Housing: The roof over your head. Home, sweet home. The proverbial castle. If you think you might miss a mortgage payment, contact your lender about hardship options. As noted above, HUD, as well as the FHA, have programs to help homeowners avoid losing their house. HUD’s “Avoiding Foreclosure” website has a variety of options and resources. Many states, too, have programs under a variety of umbrellas, from free or low-cost legal help, to forbearance programs. Because states do things differently, the best way to find out is search your state’s name and “avoiding foreclosure,” or call  your state housing authority, which will guide you to the right place.

Utilities: Power (electric and, sometimes, gas) and water are fundamental to human existence. The U.S. government’s “Help With Bills” website has resources to help people who are falling behind on their utility bills – and other financial issues.

Car payment: If you live in one of the many parts of the country where you can’t get to work, shop, or run errands without owning a car, it’s essential that you keep up on payments. A car repossession ends up costing a lot more than just the back payments, and losing your job because you can’t get to work isn’t going to help your finances. If you live somewhere where public transportation is available, or it would be cheaper to Uber or Lyft than make a car payment, move this to “priority two.”

Next comes items that, while not essential, are too important for you to ignore and hope they go away. They won’t.

Priority Two Bills

Taxes (Income and Property): Neglecting the former could cost you wage garnishments, property seizures and, conceivably, your freedom. Neglecting the latter could cost you your home.

Child support: If you don’t hold up your child support obligation not only will you put custody and/or visitation at risk, but failure to hold up your obligation can lead to wage garnishments, bank account invasions, even jail. If you’re struggling to pay, take advantage of governmental and nonprofit programs that provide additional financial support for single parents.

Insurance: There are financial and, in some cases, legal risks to letting policies lapse. If you owe on homeowner’s, renter’s, auto or health policies, pay them.

Credit cards: If possible, at least keep up the minimum payments.

Medical bills: If you have to stiff anyone, your medical provider(s) just might be the ticket. These bills tend not to accumulate interest, and nonpayment is less detrimental to your credit score.

Student loans: Lenders have programs to forbear, defer and sometimes even forgive payments for borrowers who can demonstrate money is tight.

Step Two: Budgeting

Now that you know where your money has to go, you need to create a budget – a plan that takes the money you expect to make in the months to come and determines how you’re going to spend it. It is vital that you do this. You won’t get your finances in order unless you have a handle on how much you make and how much you spend. Period.

Ideally, a household budget would show you’re paying all your regular monthly bills, expenses that you know are coming (Christmas, birthdays, your children’s tuition) and money you’ll set aside in savings. But, if you’re struggling to pay your bills, don’t expect your budget to look that rosy, and don’t be discouraged. This is the starting point, not the destination.

If your budget shows your expenses exceeding income, you need to look for ways to decrease the costs or increase your income, or both. Maybe you need to eat out less often. Cable and cell phone costs are easily adjustable or removable. You might consider turning your thermostat up a couple of degrees in the summer and down a little in the winter. Shop around for lower insurance rates. Is there a part-time job that can help you make ends meet? Are there items you can sell? Find ways to turn your budget ink from red (negative cash flow) to black (positive cash flow).

Step Three: Talk to Your Lenders

This may be hard to believe, especially if you’ve been getting collection calls, but contacting your lender may be a way to get some relief. This was especially true during the pandemic, as federal regulators such as the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency encouraged lenders to work with customers.

Even post-pandemic, lenders will likely be more understanding than they were before it. In contacting your lenders, deal in facts. Explain your financial situation, give them an honest assessment of how long you expect your tough times to last and how you are trying to resolve them. Whether your hardship is short-term or long-term will help determine what repayment options you can negotiate. If your lender comes up with a repayment plan, ask for it to be sent to you in writing.

If a bank or financial institution refuses to work with you, you have recourse. The Consumer Financial Protection Bureau, set up in 2011 to advocate for and educate consumers, has a complaint button in the top right corner of its homepage for people having a problem with a financial product or service. Don’t be afraid to use it.

Step Four: Face Your Debts

It’s human nature to avoid dealing with a problem and hope it goes away. Of course, it won’t. It can be scary when you can’t pay off your debt, and dealing with collection agency calls is stressful. But you can’t let that paralyze you into inaction. You’ve got to attack your debt.

Step Five: Consider Your Options

If faces your debt alone feels overwhelming, there is a variety of debt relief options that can help you take on this problem.

Credit counseling – Offered by InCharge Debt Solutions, credit counseling can help you assess where you are financially and point you to programs that help. Counselors can help if you can’t resolve an issue with your credit card company, and help you create a budget and repayment plan.

Debt management program – These programs create a fixed payment schedule that consolidates credit card payments into a single monthly payment on a budget that you can afford. In a debt management program, consumers generally pay lower interest rates on their credit card debt. These plans are offered by nonprofit credit counseling agencies, like InCharge, and do not use credit scores for eligibility. The counselors contact creditors on your behalf, and ask for lower interest rates. The agency pays your creditors, and you pay the agency one monthly lump sum. It comes with a monthly $40 fee, and takes 3-5 years to pay out.

Debt consolidation loans – It enables you to combine multiple debts into a single loan with one monthly payment. The simplicity makes your life easier, and if your credit score is good, your high-interest debts can be rolled into a debt consolidation loan with a lower interest. That means you can pay off your debts more quickly.

Debt settlement – Settling your debt is a high-risk option for debt relief, but one that should be examined. Debt settlement means paying less than you owe on a debt. You need to have cash available to make a lump-sum payment of at least 50% of the debt to pull this off. Not all lenders will agree to debt settlement and it does leave a stain on your credit report for seven years.

Bankruptcy – It’s an opportunity to get out of debt and make a fresh start. For the vast majority of people, there are two kinds of bankruptcy available. In Chapter 7 bankruptcy, you ask the bankruptcy court to wipe out the debts you owe, and you surrender your assets. Not all debts can be discharged and not everyone qualifies. In Chapter 13 bankruptcy, you file a plan to repay your creditors – some in full, some partially or not at all – depending on what you can afford.

Your Next Steps

If you can’t pay your bills, don’t feel alone; a lot of people are in the same situation. There are ways out – some you can probably do yourself, others that bring in outside expertise. You can get past this. If you have additional debt or budgeting questions, contact an InCharge Debt Solutions credit counselor.


Sources

About the author

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.