I know the economy is improving and the unemployment rate is dropping, and that’s good news. However, a lot of people are still struggling. I see them in my own community, at church and in my daughter’s school where the free lunch program is being offered to more and more kids. If you get to that point where there is simply not enough money to cover your bills, you might feel pinched and panicked. But don’t freak out just yet, there are ways to manage this financial crisis whether it’s temporary due to a job loss or an illness, or something you might be facing for the long term. Here’s what to do.
1. Housing bills. If you are having trouble with your mortgage, several federal programs are in place to help you. Talk to your mortgage lender right away and explain to them what is going on. It can be tempting to try and avoid those calls and letters, especially if you are already a month or two behind in your payments, but don’t ignore them. Discuss your financial situation and your loan options with your mortgage company. You might be able to refinance or even modify your mortgage to a lower interest rate or smaller monthly payments. If you suddenly find yourself unable to pay rent, don’t wait for the eviction notice to show up, talk to your landlord. Explain the situation you find yourself in, and maybe together you can come up with a plan to stay in the home and catch up on rent payments.
2. Monthly bills. If you’re finding it difficult to scrape together money for your electricity or water, talk to your utility companies as soon as you know you won’t be able to pay a bill on time. They are usually willing to work with you and you won’t have the surprise of losing your electricity or water because of overdue bills. Most utility companies have programs in place for low income households as well and you might qualify for one of their programs. You will also have to make some hard choices. If you are facing financial difficulties, you might need to consider eliminating cable or cutting down your cell phone plan.
3. Credit cards. If you are drowning in credit card debt and you simply cannot catch up on payments, you need to talk to your bank. If you are in a temporary financial hardship, they might be willing to allow a grace period before they get hardcore on their collection activities. If you have no prayer at all of ever paying off the balances, close the account and work on a plan to pay off the balance over time. Your bank might be willing to lower your interest rate, freeze the late fees and provide a monthly payment plan that’s closer to what you can live with.
4. Consider bankruptcy. No one likes to go through the process of bankruptcy, but if you really cannot pay your bills and none of your banks or lenders are willing to work with you, it might be your only option. Declaring bankruptcy will have serious implications for your credit and your financial standing. Talk to a lawyer about your options, especially if you have property and investments that might be at risk and considered assets that can pay off your debts in bankruptcy court.