Finding out that you cannot pay your debts is financially devastating. Although this is not a situation to take lightly, it is possible to work your way through it and get back on track financially. Creating a plan to deal with your financial situation, and then executing that plan can be the difference between success and failure in your pursuit of financial well-being.
Determine the Priorities
When you cannot pay some of your bills each month, but still have money coming in, determine your priorities or what is the most important debt or bill that you should pay. For most families, this is the mortgage payment or the rent to maintain your shelter. Food should also be considered as part of the priority list. Utilities, keeping the heat and lights on, and transportation or other expenses that let you work round out your priority bills. If you can pay these bills, you will have shelter and food, and be able to travel to your job.
Communicate on Your Terms
If you do not have enough money left over to pay other debts after paying the priority bills, you have no choice but to remain past due on the bills you cannot pay. Many credit card companies will start to call you multiple times in one day. You do not need to talk with these people when they call, but if you do, you need to be truthful about your situation and tell them that you cannot pay. To lower your stress level, set guidelines on how often you will communicate with creditors, and inform them of your intentions.
Develop a Budget
To get ahead financially, you must plan for the future and how you will handle your finances. A great way to do this is to create a budget. List your income on a sheet of paper and all your monthly payments, starting with the priority expenses. Plan for each dollar that comes into your home each week, and have each dollar have its own purpose. If you are married, create the budget with your spouse. Once everything is on paper, follow the plan that you have developed, without exception.
Consider Your Alternatives
If after considering your priorities and trying to create a written budget you determine that there just isn't enough money to realistically pay your bills, you may need to consider some alternatives. You may need to sell a car or two to reduce your payments to a more manageable amount. Perhaps your house is too expensive for your income level and you need to sell it. If selling assets won't significantly help your financial situation, you may need to file for bankruptcy and seek protection from your creditors under the guidance of the U.S. bankruptcy court.
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