If You Stop Paying Bills
Here are some tips to help you buy some time when you are on the verge of a financial disaster. Let’s talk about how you can cause yourself least damage when falling into debt.
People who’ve successfully paid out their debts mostly have the money to ay all or at least most of the debts, to make regular payments even if the budget is cut in half. However, it is not always true for many Americans nowadays, with the skyrocketing unemployment rates. It doesn’t matter how you got into debt – wrong decisions, wrong planning or bad luck or the three of them. The truth is sometimes you just don’t have the scratch to pay your debts.
However, do not rush to file chapter 7 bankruptcy. That just might be strong overreaction to the debt problems and increasing harassment from the creditors and collection agencies. It all depends on how large your debt is and what are your financial prospects.
It is psychologically essential in times like this to understand how to give yourself some breathing room so you can sit down, think and work out a plan to pull your finances back together, as well as minimize the damage your current situation can cause you.
The most useless strategy when dealing with debt is to ignore it, stick your head in the sand and deny the seriousness of the problem. It only makes things worse. When people panic they usually tend to make wrong choices, like they ay credit card debt just because the credit card company is pressuring them, instead of making a timely payment towards the mortgage. Some people simply stop paying on all of their debts just because they can’t afford to pay them all.
The essential point for your financial well-being in future is to know how to prioritize your payments when you can’t be on time with all your bills.
Your credit score is very sensitive to late payments. Usually it takes up to 30 days to be reported to credit bureaus as delinquent and have your credit score affected by the late payments. The more debts you are late on, the more your credit score will be affected. That impact can be rather long-lasting, however once you get back on your feet and start mending your debt holes the credit score will undoubtedly heal. Some lates are more devastating than others. So, when you know the potential consequences of being late on this or that debt is essential in prioritizing your bills.
The essence here is that your home (rent or mortgage) and utilities, food and anything that helps you work (Internet, car payments) are your top priorities. Child care, child support and taxes are also in the top priority chart.
If you miss one payment on rent your landlord will start eviction process and you’ll be out on the street in a matter of weeks. Mortgage lenders and auto lenders are fast to react and take actions. Whereas credit card companies, student lenders and medical providers usually wait for several months before start the collection proceedings.
Here is a brief chart of late payment consequences.
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Debt
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Time you have until the trouble comes
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Potential Consequences
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Mortgage
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90 to 120 days late
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Foreclosure, loss of home
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Auto loan debt
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One day late (but typically lenders wait 60 days)
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Repossession, loss of car, potential for collection of unpaid debt
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Student loans
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270 days late
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Garnish wages, tax-refund seizure
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Credit card debt
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180 days late
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Account "charged off," sent to collections
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Collections accounts
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Depends on debt amount, collector
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Lawsuit, wage garnishment
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Tax debt
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Depends on debt amount, collector
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Garnish wages, property or bank account seizure
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Child support debt
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Depends on debt amount, collector
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Lawsuit, wage garnishment, imprisonment
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