Life Events

Falling behind on bills is stressful, but it is rarely hopeless. The sooner you face the problem, the more options you will have. These steps can help you regain control.

1. Get the full picture

List every debt: the creditor, balance, interest rate, minimum payment and whether the account is current. Add your income and essential expenses. You cannot fix a problem you have not measured, and many people find the real numbers less frightening than what they imagined.

2. Protect the essentials first

Prioritize housing, utilities, food, transportation to work, health care, insurance and taxes. Debts tied to a home or vehicle, or to the IRS, can have more serious consequences than unsecured credit card balances. If you owe taxes, contact the IRS promptly rather than ignoring notices. Payment arrangements are often available, and our office can help; see our IRS problem resolution page.

3. Cut spending and find extra income

Build a bare-bones budget for a period of time. Cancel subscriptions you do not use and trim discretionary spending. Consider overtime, temporary work or selling items you no longer need, and use any extra to pay down debt.

4. Talk to your creditors

Call before you miss payments, if possible. Creditors may offer hardship programs, lower rates, waived fees or revised payment schedules. Get any agreement in writing and keep records of all conversations.

5. Choose a repayment strategy

• Highest interest first: usually saves the most money.
• Smallest balance first: provides early wins that keep some people motivated.
• Consolidation: combining debts into a single loan may lower your rate or payment, but be sure the total cost really goes down and that you do not run balances back up.

6. Be careful with outside help

Nonprofit credit counseling agencies can review your situation and may offer a debt management plan. Be cautious about companies that promise to erase debt, charge large up-front fees or tell you to stop communicating with creditors. Debt settlement can damage your credit and may create taxable income when part of a debt is forgiven.

7. Know your legal options

If debts are overwhelming, bankruptcy is a legal option that can provide a fresh start, though with long-lasting effects on credit. Consult a qualified bankruptcy attorney before deciding. Know too that debt collectors are subject to federal rules about how they may contact you; see consumerfinance.gov.

8. Prevent a repeat

Once things stabilize, build a small emergency fund and set up automatic payments to avoid late fees. Even modest savings can prevent the next setback from becoming a crisis.

You do not have to sort this out alone. Contact our office for a confidential conversation about your situation.