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Unemployed Bill Crisis
by Gary Foreman
Question:
My husband has been out of work for 5 months and the income he did bring
in when he was working was double what I currently bring in. Needless to
say, my checks and the unemployment is not paying the bills. I am
starting to panic because bill collectors are calling daily. I cannot
tell them when I can make payments so they continuously call at home and
work. I feel like I am going to lose my mind because of this!
I am making sure that my house payment is paid, utilities, car
insurance, but everything else is getting severely behind. What do I do?
Do we have any way of getting out of this mess? Any rights?
SS in WA
Answer:
Sounds like SS is in a tight spot. We'll spare SS the obvious advice of
cutting unnecessary costs. Let's rather focus on how to handle the
mountain of bills.
First, it's important to get some breathing room. SS won't make good
decisions if she's losing her mind! Begin by asking the collection
agencies to stop calling you. Do it in writing. Use a postal method that
proves that your correspondence was received. Bill collectors are
required by federal law to stop calling you if you ask them.
Second, estimate how long the situation will last. Are you looking for a
one month solution? Or one that will work for one year? Estimating will
mean honestly evaluating hubby's job prospects. Is it realistic to
expect him to find a similar paying job in your coSSunity? If not,
you'll need to make some decisions. Would SS be willing to move to
another area and give up her job to replace his lost income? In any
case, you'll need some estimate of when income should increase.
This may be a good time to evaluate a change in career paths. Sometimes
happiness is found in a lower-paying, but less stressful career.
Third, SS will want to inventory their bills. How much does it cost each
month for the basic necessities? Thankfully, it appears their current
income covers the basics.
She'll want to look at her bills with an eye towards reducing or
eliminating them. Start with the biggest ones: the mortgage and any car
payments.
SS should check to see if they have credit insurance that could make
payments until hubby is employed again. Many consumers forget that they
even have it. A simple call to your creditor can tell.
Consider refinancing your home. Not just for a lower rate of interest,
but also to stretch out the term of the loan. The longer the loan the
lower the monthly payment.
SS may also want to use the equity in her home to pay off some debts.
Especially ones like credit cards that are charging very high rates of
interest.
Try to negotiate a new loan on your car. Either your current lender or
another may be willing to allow you to finance the car over a longer
period of time.
SS may find that it's best to either sell or even let one car be
voluntarily repossessed. A repo could leave her owing money after the
car is sold, but at least the monthly payments and cost of insurance
would disappear.
Now on the smaller monthly bills. SS needs to make a list of all of the
bills with the monthly minimums and the interest rate being charged.
Contact the people that you owe money. Begin with the biggest bills.
Explain the circumstances and offer to pay what you can. Before you
contact them know how much you can realistically afford to pay each
month. Do not make promises that you won't be able to keep.
SS may find that even after talking to her creditors that she can't
cover all the monthly minimums. That leaves her with a few choices. One,
pay some minimums and let other accounts go unpaid until after hubby
returns to work.
A second option would be to work with a debt management firm. Often they
can get creditors to reduce minimums and interest rates. Usually late
fees will be waived. Talk to a couple of companies before choosing one.
Ask them to explain what they can do for you and what you'll be charged
for the service.
A final option is to declare bankruptcy. If job prospects are poor and
you simply can't keep up with the minimum payments a bankruptcy could be
inevitable.
All of these choices will leave marks on your credit history. That can't
be helped when you fail to pay bills. It may take up to 10 years before
your record is completely clean. But the road to recovery will begin as
soon as you take control of the situation and begin making payments at
an agreed rate.
Let's all hope that SS's husband finds a great job real soon.
Gary Foreman is a former financial planner who currently edits The
Dollar Stretcher website
www.stretcher.com and ezine
subscribe@stretcher.com
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