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What to Do When You Can’t Pay Your Bills

There are few feelings so hopeless as looking at a stack of bills and knowing you don’t have the money to pay them. If you have children, or an elderly parent or disabled family member to care for, and can’t pay your bills, it can be overwhelming.

There are options, though, whether you just can’t catch up on bills, or you can’t pay them at all. Getting back on track means taking positive steps. No matter what your financial situation, a strategy to turn things around will help you sort out your finances and determine what action you may have to take to pay bills when you have no money. Taking control will help ease the anxiety caused by unpaid bills and motivate you to keep taking steps in the right direction.

The five steps to paying bills if you have no money are:

  1. Prioritize your bills
  2. Budget
  3. Talk to your lenders
  4. Face your debts
  5. Consider your options

We’ll also look at the status of COVID-19 debt relief resources, and see what, if anything, is still available for parents, renters, homeowners and those with student loans.

Step One: Prioritize Your Bills

Some bills can be temporarily put off without severe negative consequences, while other missed payments can quickly lead to disaster. The key is knowing which is which.

Essentials like food, shelter and utilities come before anything else, including cellphone, cable and internet service. Another essential is your credit score, which is the key to financial stability now and in the future. It may be damaged as you work to get back on track, but it can recover quickly once you do.

Priority One Bills: Essentials

Food: Your top priority is feeding yourself and your family.

Housing: If you must miss a mortgage payment, or you can’t afford your mortgage, contact your lender about hardship options. The U.S. Department of Housing and Urban Development (HUD), has an “avoiding foreclosure” webpage, and, with the Federal Housing Administration (FHA), has programs aimed at helping homeowners keep their houses. These programs are administered through state housing authorities (or agencies), which also will help you find other resources.

Utilities: If you can’t pay electric, heating, cooling, natural gas or water bills, the U.S. government “Help with Bills” website has utility assistance resources. You can also research ways to save money on utility bills.

Car payment: If you can’t get to work without a car, on-time payments are essential. A car repossession is expensive, and can cost your job if you don’t have transportation. If public transportation is available where you live and you can’t afford car payments, consider selling your car.

Priority Two Bills

Taxes (Income and Property): The IRS and states with income tax have payment programs and other help. Ignoring income tax can mean wage garnishments, property seizures, even jail. You can lose your home if you ignore property tax.

Child support: Missing child support payments can put custody and visitation at risk, and lead to wage garnishment and bank-account intrusion. It can also put your children at risk, since your payments help feed, clothe and shelter them. Parents in states that make payments through a state entity, can also get help to adjust payments through that entity if they can’t afford them. If you make payments directly to your child’s other parent, contact your state’s low-cost legal aid program to discuss options.

Insurance: There are financial and legal risks to letting policies lapse. If you can’t pay homeowner, rent, auto or health insurance, call your insurance agent and ask about adjusting your policies to make payments more manageable.

Credit cards: Keep up minimum payments, if possible. The more you fall behind, the more your credit cards will cost you.

Medical bills: These can go to the bottom of this list. They don’t accumulate interest, and nonpayment does less damage to your credit score than missed credit card, mortgage and auto loan payments. They may be sent to a debt collection agency, so brace for the phone to start ringing.

Student Loans: Lenders and the government have programs to forbear, defer and even forgive payments if you can prove money is tight.

Step Two: Budgeting

Now that you know what your bill-paying priorities are, it’s time to create a budget. Your budget will reflect what you expect your income to be in the coming months, and set a plan for spending it.

Creating a budget is vital, even if you don’t have much income and have a lot of bills. You won’t get your finances in order unless you have a handle on what’s coming in and where it’s going.

An ideal household budget would reflect on-time payment of all your monthly bills, as well as expenses that you know are coming (Christmas, birthdays, tuition) and include money for savings.

If you’re struggling to pay your bills, don’t be discouraged if your budget isn’t that rosy. Consider it a starting point on your journey to get out of debt.

If your budget shows that you have more expenses than income, you must find ways to decrease costs, increase your income, or both. The goal is to find ways to turn your budget ink from red (negative cash flow) to black (positive cash flow).

Budgeting: Cutting Expenses

To cut expenses, first check the options in the priorities list and see if any apply to you. Can you adjust insurance, tax or child custody payments? Is selling your car and buying a cheaper one, or going carless, an option? Can you get a roommate? If you can’t afford your cable bill, or your cellphone plan, take a look at your plan, see what you’re paying for and whether there’s a cheaper option, or consider getting rid of cable altogether.

Putting your budget in the black may be as simple as turning down the thermostat in the winter, or turning up (or off) the AC in the summer, unplugging electronics, turning off the all-night outdoor lights, eating at home, buying store brands and using coupons, cutting down on streaming services or putting a freeze on online shopping.

Don’t think of any expense as “too small” to cut. Successful expense-cutting is an accumulation of small, moderate and sometimes big moves. It also involves changing bad habits.

Budgeting: Increasing Income

Cutting expenses is quicker and often easier than increasing income. Still, many people think increasing income is a less painful option. If you plan to increase your income, look for part-time jobs that won’t cost you more money in childcare, transportation, supplies or other expenses than it’s worth. Make sure it won’t interfere with your full-time job. If you are considering selling items, online or at a local consignment shop, research the market and what added costs are, and make sure you will make the amount of money that you need to. Manage expectations, do your research and consider all the implications if you plan to increase income. Many options often turn out to be less lucrative than you may have expected. Keep in mind, too, that increasing income rarely works if your spending also increases.

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 debt relief if you can’t afford your bills. 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 may be more understanding than they were before it.

When you talk to your lender, deal in facts, not emotion. Explain your financial situation, give them an honest assessment of how long you expect your tough time to last and how you are trying to resolve it. Your budget, and the knowledge you’ve gained from it, will be an effective tool for making this a successful conversation.

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 that it be sent to you in writing.

If a bank or financial institution refuses to work with you, and you feel they are being unreasonable, 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 hoping, by doing so, it will just go away. Of course, it won’t. It can be scary when you can’t pay bills, or pay off your debt, and are trying to feed and shelter your family. Dealing with collection agency calls is stressful.

It would be great if there were a good way to pay your bills with no money, but there isn’t one that doesn’t involve you being proactive. You’ve got to attack your debt in order to eliminate it.

Taking positive action will boost your confidence and give you the motivation you need to keep going.

Step Five: Consider Your Options

There are a variety of debt relief options that can help you pay your bills if you have no money to do it on your own.

Credit counseling: Offered by InCharge Debt Solutions, credit counseling can help you assess where you are financially and point you to programs that help eliminate debt. Counseling is free, and counselors will help you if you can’t resolve an issue with a credit card company. Counselors will also review your finances with you, help you create a budget, offer financial education tools and go over debt relief options.

Debt management program: Debt relief through a debt management program consolidates your credit cards into a fixed monthly payment that fits your budget. Consumers in debt management plans offered by nonprofit credit counseling agencies, like InCharge, generally pay lower interest on their credit card debt, which is eliminated in 3-5 years. Credit scores are not used for eligibility, and it is not a loan. The counselors contact creditors on your behalf, and ask for lower interest rates. The agency pays your creditors, and you pay the agency the monthly fixed payment, which includes a $40 fee.

Debt consolidation loans: Multiple debts are combined into a single loan with one monthly payment. The simplicity of one payment makes your life easier, and if your credit score is good, your high-interest debts can be rolled into a debt consolidation loan with far lower interest than your credit cards. The lower interest, as well as a fixed term, means you can pay off your debts more quickly.

Debt settlement: Settling your debt with a for-profit company is a high-risk option for debt relief that involves paying less than you owe on the balance. You make payments over 2-3 years into an escrow account, and the debt settlement company negotiates a payoff amount with your lenders. Not all lenders will agree to debt settlement. Debt settlement companies are for-profit and, therefore, you will also pay fees, and it is a negative mark on your credit report that stays for seven years.

Credit card debt forgiveness: Nonprofit credit counseling agencies, like InCharge Debt Solutions, began offering credit card debt forgiveness, also called nonprofit debt settlement in 2021. Like for-profit debt settlement, you pay 50-60% of what you owe. But it’s different in that the agency has relationships with the lenders, so there is no lengthy negotiation period. Those in the program make fixed, interest-free, payments for 36 months, and are debt-free when it’s over. There are strict qualifying requirements, and since it’s a new program, not all creditors participate.

Bankruptcy: Bankruptcy is an opportunity to get out of debt and make a fresh start, but it has long-term financial consequences. In Chapter 7 bankruptcy, the bankruptcy court wipes out your unsecured debt, and while technically you surrender assets, you can keep most of your belongings, including your house and car. With Chapter 13 bankruptcy, the court approves a plan for you to repay your creditors. Once the plan is complete, any unsecured debt left over is forgiven. A bankruptcy stays on your credit report for 7-10 years, drops your credit score by 100-200 points and makes it harder to get credit or a loan for years to come.

What Can Happen if You Don’t Pay Your Bills

There are serious consequences for not paying bills, both in the short and long term. Whatever your financial situation is now, not paying your bills will make it seem like a cakewalk.

Consequences of not paying bills include:

  • Late fees: Lenders will charge a late fee if you miss one payment, whether it’s your mortgage, auto loan or credit cards. Credit card companies can increase the fee from $30 to $41 if you miss two payments. They can charge a late fee every time your payment is late.
  • Higher interest rates: Credit card companies can increase the interest rate on all purchases going forward if you haven’t made a payment in 60 days, which will make your balance balloon.
  • Lower credit score: On-time payments count for 35% of your credit score, so missing payments will decrease your credit score. The lower your score, the harder it will be to get credit or a loan, or even an apartment or job.
  • Disconnected service: If you don’t pay bills for a service (cellphone, cable, electricity, etc.) the service will be turned off until you catch up. The provider may charge extra fees for the missed payment, reconnecting and more.
  • Losing your house or car: Mortgages and auto loans are secured by your house or vehicle. That means if you pay your mortgage late, or don’t pay, your house will be foreclosed on. If you miss too many car payments, your vehicle will be repossessed.
  • Collections and lawsuits: Lenders can send a bill to a collection agency once its 180 days overdue. They can also sue you in court and win judgments that put liens on your property or result in wages being garnished.
  • Future issues getting service, credit: A bad credit record, particularly a foreclosure, repossession or account in collections, will make it difficult to get loans or credit cards. It will also make it hard to get a cellphone contract, internet, car insurance and other services. What credit or services you do get will come with high interest and fees.

Building Good Financial Habits to Avoid Missing Payments

Building good financial habits and setting financial goals can help you avoid missed payments, and the consequences that come with them.

Prioritizing your expenses, creating a budget and sticking to it are the foundation. Seriously looking at how you spend money is part of that. Don’t question paying your priority bills, but do take a hard look at everything else. Ask yourself if you really need something, or if you just want it. Envision a future in which you can sit down at the kitchen table and pay your bills without that scary sinking feeling. Keeping an eye on that goal may be all you need to live a more spending-conscious life.

If you can’t do it without help, it’s time to call a counselor at a nonprofit credit counseling agency.

Your Next Steps

If you can’t pay your bills, you are not alone. Credit card delinquency is on the rise, and much of that is the fact people are having trouble making ends meet, and using credit to pay for purchases. It’s the debt spiral.

Contacting a counselor at InCharge Debt Solutions will put things into perspective.

Think of the counselor as fresh, nonjudgmental, eyes on your finances. They’re trained in credit and debt relief counseling, and can help you look at spending and finances through a different lens. You aren’t obligated to enroll in a program if you call, and nonprofit counselors are required by law to give advice that’s in your best interest. Not only will they go over your budget, they’ll discuss how to access and understand your credit report, how to find financial tools and resources to help you pay your bills or get housing help, and more.

They will also review all of the debt relief options – debt management plans, debt consolidation loans, debt settlement, nonprofit debt settlement and bankruptcy – and help you determine which is best for your situation.

Statistics show credit counseling works. Consumers with debt reduced their revolving credit by nearly $1,800 in the 18 months after talking to a counselor, according to a 2019 study. Discussing debt and finances with the counselor, having access to financial tools and gaining an understanding of how debt and finances worked led to the debt reduction, the study theorized. Consumers who chose one of the five debt relief options showed even greater success at decreasing debt.

More Help with Bills

There are many sources that provide help to pay bills.

Start with the U.S. government’s Help with Bills page. Some of its resources are:

  • Home energy bill help
  • Medical bill help
  • Temporary Assistance for Needy Families (TANF)
  • Help paying utilities
  • Help with prescription drug costs

AARP Foundation has a webpage devoted to public benefits, including links to help paying bills in every state.

General Assistance is offered in 25 states, and helps people in a financial emergency meet basic needs,  such as shelter and utilities. States differ on qualifications, what type of benefits are offered, how it’s paid (to the recipient or service provider), and whether it’s administered through state, county or local government.

Benefit amounts range from $79 a person in Delaware to $797 in New Hampshire. In Maine, the municipality determines the benefit amount.

States that are more flexible, allowing those who are “employable” as well as disabled or unemployable, to receive benefits are Alaska, California, Indiana, Iowa, Maine, Nebraska, Nevada, New Hampshire, New Jersey, New York or South Dakota.

In the other 14 states, government assistance is only available to individuals with a disability. Those states are Colorado, Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, Ohio, Rhode Island, Utah, Vermont, Washington and Washington, D.C.

Aside from GA, state, county and municipal governments have information about benefits to help individuals and families who can’t pay their bills. Nonprofits, including churches, often offer benefits to people in financial need. Contact your state social services agency or local government to find out more.

About The Author

Maureen Milliken

Maureen Milliken writes about personal finance and debt relief topics for InCharge Debt Solutions. She started as the “Business Beat” columnist for the now-defunct Haverhill (Mass.) Gazette and has been writing about finance, real estate and business for more than 30 years. She also is is the author of three mystery novels and two nonfiction books.


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