When You Are Unable to Meet Credit Payments

Financial troubles can sometimes sneak up on you. If you are having trouble paying your bills, getting final notices from creditors, or have accounts being turned over to debt collectors, it's time to reevaluate your plan for managing debts.

A bad credit record will trouble you for years. Your credit history reflects your payment habits, whether good or bad, so it's important to make payments on time to maintain a healthy credit file.

Though your life may be a bit bumpy for a time, you can make sure you'll recover more quickly if you:

1. Exercise your negotiating power.
   You may be able to negotiate credit terms on your credit cards. Credit card companies do not want to lose current cardholders. Once you explain your situation, card companies may be agreeable to renegotiating terms so you can continue paying your debts. Call each of your credit card companies and ask for lower interest rates, but do it before the situation gets worse.
2. Reduce your interest payment.
   If you have a number of credit cards, see if you can consolidate all the debt onto the card with the lowest interest rate and then work on paying down that balance. If it's not feasible to combine all your card debt onto a single card account, concentrate on reducing the balance on the card with the highest interest rate first.
   For more information on interest reduction, see Lower Your Interest page.
3. Scale back.
   Start by monitoring every penny you pay out. Cut out purchases that aren’t essential. Consider a smaller house and/or car. Sell items in your house that you don’t need or use at an online auction, or hold a garage sale to raise some additional spending cash. If you declare bankruptcy, but don't change your spending practices or lifestyle, you will find yourself right back in debt.
4. Talk with a nonprofit counseling agency.
   If you don’t think you can tackle your debt without help or advice, a nonprofit counseling agency will help you negotiate with your creditors to reduce interest rates and/or suspend late and over-limit fees. If you agree to a debt repayment program, you'll make one monthly payment to the agency, which the agency then disburses to each of your creditors. You won’t receive any more of those annoying and stressful collection calls, either.

What should you do if you run into severe financial trouble?

Immediately contact one of the non-profit credit counseling organizations available all over the country. These organizations have years of experience helping millions of people get out of debt, and will help you at no charge or for a small fee. See Debt Management page for further info.