How To Deal With Creditors When You’re Unable To Pay Your Debt

Many of us have been here before. It’s frustrating and stressful, but you must deal with it as it can only get worse when ignored. First, take a deep breath… Better? When you are in over your head with debt, and it seems impossible to pay them all, it’s time to come up with a plan. The worst thing you can do is ignore the seemingly obnoxious phone calls and face the facts. The harassing calls will continue until you do something about it and there is a solution. It’s time to accept the situation you got yourself into, look yourself in the mirror, and start the process by taking the first step.

Cutting your expenses

Creating a budget when you don’t have much to work with can be difficult. You January not have any extra room at all, thus creating an issue. At this point you have to start thinking about cutting your expenses down, or possibly getting a second job. Either way, the money has to come from somewhere and you are going to have to buckle down. You January have 10 creditors that you are trying to pay off and only $100 per month to spend. Don’t beat yourself up, because you have to work with what you have. If you have come to accept the situation you are in and started devising a budget, then you are already on your way to repairing your credit.

A few things you might consider to speed up the process:

  • Have a garage sale
  • Sell one of your collections
  • Sell some furniture in your house
  • Take a second job
  • Do some freelance work if you have a skill
  • Sell your car and downsize to a cash vehicle
  • Sell your house and downsize to a smaller home
  • Take out a home equity loan if you can to consolidate your debt
  • Refinance your home

Creditors hassling you?

It’s important to know your rights and if you have creditors that seem unwilling to work with you there are resources that can educate you on how to approach them. One of my favorites is the direct source at USA.gov which tells you exactly what to do in this situation.

Most consumers don’t know all of their rights and let creditors take advantage of them while they are in a hard spot. Hopefully by educating yourself, you can build some confidence knowing that everything is going to be okay. You can face your debt problems, and you can get out of debt.

Planning a budget

After you have cut some expenses, landed a second job, or paid off some things by selling your assets, there is still some work to do. Consumer.gov has an excellent resource for planning out your budget to pay off debt. It gives you information on what a budget is, what to know, and how to implement one. If you have some extra cash and you are comfortable with technology, you January want to invest in some personal finance software like Quicken. This will help you create a budget and even integrate it with your bank account. In fact, there are some banks that now have budgeting software built into their online banking platforms. If so, you January want to think about utilizing it so that you can manage your money proactively. I good free option is Mint.com. Whichever option you choose, it’s important to account for where every dollar is going.

Some important things to know when planning your budget are:

  • Make sure you are putting some money into savings. It January only be $10, $20, or $100 per month. Either way, life always happens and if you aren’t prepared for it, you will end up in the same situation you are in now.
  • Write you’re your income and expenses down. Try using a budget worksheet to get you started. It will act as a good guide for you so that you don’t miss anything.
  • Budgets are simple – If you are spending more than you are making, it’s time to start making some cuts. You can do it!

Contact all of your creditors

As I said before, it’s time to face the music. Contact your creditors and tell them what you can pay. Yes, they will try to get you to pay more, but stand firm and let them know that is just not within your budget. Paying them something, is better than paying them nothing.

If at all possible, choose the two credit cards with the longest positive history and pay the full amount due. This will help ensure that you retain a positive credit record with at least two creditors which is important in rebuilding your credit in the future.

Just remember, it’s easy to get into debt, but it’s hard to get out. It’s going to take you some time and work.

Joe Orsak is the CMO of Improve My Credit USA, a Dallas Credit Repair company, also with a location in Houston, TX. His passion is helping consumers get out of debt and rebuild their credit so that they can start living their dreams again.


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