Most Americans live paycheck to paycheck. It is not uncommon for people to find themselves with too much month left for the money they have. So how do you pay your bills with no money? Obviously, you don’t, but there are some things that you can do to keep a bad situation from getting worse.
Prioritize And Make A Budget
The first step to taking control of your financial situation and figuring out how to pay your bills is to look closely at your budget. Make a list that includes every expense you have each month.
Next, prioritize those expenses. The first items that you always pay are for the absolute necessities- shelter (rent or mortgage payment), food and necessary utilities (gas, electric and water). Next, include the expenses necessary for you to work, such as gas for your car and parking.
• Can you save some money on these items? Is a budget payment plan available for your utilities?
• Can you move someplace cheaper to live?
• Can you modify your mortgage with your mortgage company (more on that below)?
• Are you clipping coupons and watching for sales on groceries?
• Are you limiting eating out?
Eliminate any non-essential items from your budget. Get rid of cable, large data packages on your phone, gym memberships, streaming services, subscriptions. All of these little items add up. If it is not necessary for you to live, get rid of it.
Once you have the necessities under control, move on to your secured debts, such as car payments and mortgage payments. Mortgage lenders are often willing to work with homeowners through a modification plan. Contact your lender, there are likely options for you. Your car lender may let you skip a payment or two and tack it onto the end of the loan. You might be able to refinance to get a lower monthly payment. Talk to your lender about your options.
After you have cut your expenses, look at your income.
• Are there ways that you can make more money?
• Can you work overtime?
• Get a side job?
• Do you have things that you could sell?
• Coins that you can roll?
• Can you rent out a room?
Borrow money sparingly. Never resort to a pay day loan; it will create more problems. If you are looking at a credit card with a great introductory rate, make sure you can pay it off before the rate expires. A personal loan with decent terms can help temporarily, but make sure you will be able to pay it off.
Talk To Your Creditors
The longer you wait to talk to your creditors, the bigger a problem it will be. If you do not communicate, your creditors have no choice but to think that you are not going to pay, and will take even more aggressive steps to collect.
Staying in contact with them lets them know that you are trying. Explain your situation; request extensions of time to pay; see if you can skip a payment; try to get fees waived or a temporary payment reduction or interest rate reduction. Utilities will often offer a payment plan, especially during peak heating and cooling months.
If you owe medical bills, most have payment plan options available. Many hospitals have programs that may even forgive part, or all, of your bill.
If you owe student loans, contact your lender right away. Student loan lenders, especially if they are government loans, have many different repayment options available that depend on your income and household size. Contact them, explain your situation and ask what plans may be available.
Seek Professional Help
There are professionals that can help you. You can work with a debt counseling agency. They can help you prepare a budget, create a plan to dig out of debt and even negotiate with your creditors. Make sure that any debt counseling agency is legitimate. It should be non-profit and a member of a reputable group such as the National Foundation of Credit Counselors or the Association of Independent Consumer Credit Counseling Agencies. Check with your Better Business Bureau too.
A debt counseling agency can also help determine if you are judgment proof. This means that even if a creditor was to get a judgment, they would be unable to collect. If your only source of income is social security and you have no assets, you may fall into this category. If that is the case, a credit counseling agency can help contact your creditors to let them know this and can at least help buy you peace from the incessant phone calls.
If you have very severe financial problems, you may want to look at a debt management plan (DMP). Here, the credit counselor will negotiate with your creditors; you make one payment each month to the agency handling your plan; the agency pays your creditors. Be very careful with these. There are a lot of different variations and the fees can be very high. Make sure you clearly understand how the program works, what the effect on your credit report will be and the potential tax consequences of settling with your creditors.
Sometimes, the best option is to file bankruptcy. A Chapter 7 filing will allow you to discharge most unsecured debt, like credit cards and medical bills (but not student loans), while keeping the debts you want, such as car loans and mortgages.
The trade off with Chapter 7 is that you may lose some assets if they are not exempt. A Chapter 13 filing is a repayment plan that gives you three to five years to make payments to your creditors under a plan that you propose. Unsecured creditors do not usually get paid in full, and you get time to catch up car payments and mortgage payments that are behind.
You will want to talk to a knowledgeable bankruptcy attorney to help evaluate your situation.