Several simple strategies can help you manage expenses and cash flow when you can’t pay your bills anymore.
Almost everyone has money problems at some point in their lives. Usually these problems are temporary, but sometimes the situation stretches into the long term. People who find themselves chronically behind on bills often find themselves asking: What do you do when you can’t pay your bills? Our strategy can help people with cash flow issues get back on their feet—and stay there.
Pay Your Vital Bills First
Any service that is essential for living your life—food, shelter, heat, electricity, and transportation—is considered vital. For many, phone service and child care also count as vital. For our purposes, other expenses (medical bills, credit card debt, etc.), are considered non-essential.
First, add up all your vital bills. If the total is affordable, your position is better than you might initially have thought. However, if the vital bills are out of reach, some big moves may be required—literally. Perhaps you will need to relocate to a smaller residence. Still, if keeping up with your mortgage is a persistent issue, keep in mind that the foreclosure process can take months. In other words, you may not have to move quickly.
You may also qualify for discounts on your utilities, for food bank assistance, or food stamps. Significant amounts of money can be freed up by reducing your food budget.
Decide Which Payments to Delay
Once your vital bills are under control, start looking at the types of debt you still have. Some bills can be avoided for a certain amount of time in Arkansas and Oklahoma, although skipped payments will eventually lower your credit score. Nonetheless, credit damage is seldom permanent. First, minimize the more serious risks: auto repossession and foreclosure.
Ignoring a credit card payment typically impacts only your credit rating. Ignoring a car payment, however, can result in repossession. Failure to make federal student loan payments or annual taxes can also carry real-world penalties such as garnished wages. Keep in mind that reduced income is the last thing you want at this point. Nerd Wallet has put together a useful table that illustrates how long you can go without paying a bill before “real trouble” starts.
Consult a Bankruptcy Attorney
If shuffling and delaying payments does not significantly improve your situation, you may need to consider a more drastic approach.
There are several reasons to file bankruptcy, most of which are based on the simple fact that incoming funds cannot cover outgoing expenses. Although bankruptcy is terrifying to most people, in fact it can help you start over on solid ground. Before taking this route, though, it may be a good idea to consider alternatives to bankruptcy.
If you have exhausted your other options, sitting down with a bankruptcy attorney is the best solution. He or she will be able to assess your situation and provide valuable advice. Your attorney will be ready and able to help if you decide to proceed.
Please contact the firm of Nolan Caddell Reynolds to consult a bankruptcy attorney in Arkansas or Oklahoma. Our associates, who also specialize in personal injury, Social Security, and disability, can be reached at (800) 709-5297.