July 2006:
Before It’s Too Late…
What to Do If You Can’t Pay

Making timely debt payments isn’t always easy – and the recent combination of increased minimum payments, rising gas prices, higher interest rates, and inadequate emergency savings have made finding the cash to pay when you need it even trickier.

However, since late payments result in not just hefty penalty fees, hiked up interest rates, and credit report damage that lasts for years, taking action well before your accounts fall behind is essential. You can avoid the problems by knowing what to do if you can’t pay on time.

Don’t delay. Contact your creditors before you skip a payment. They’ll be more apt to work with you and offer special programs that can keep your accounts in good standing.

Talk with the top. Ask to speak with a manager or supervisor regarding your account. They have more authority to strike a deal or make special arrangements than customer service representatives.

Keep your cool. If you can’t pay, explain why clearly and calmly, even if it's because you were "irresponsible." Tears, threats, and excuses rarely help and can even hurt.

Be conservative. Think you can send a payment in two months? Ask for three. If you fail to meet a deadline you may not get another chance for a break.

Suggest specific solutions. Options include a hardship plan (lesser or no payments for a period of time), reduced or eliminated fees and interest, and paying interest only until you can back on track.

Always be organized. Keep a log listing names, dates, and what was said and decided. Correspond by mail and keep paper copies of everything you send and receive.

Learn the law. What creditors can and can’t do to get you to pay is highly regulated (no, you cannot go to jail for not paying your Visa bill). If a debt is secured, the collateral (such as a car) may be repossessed. If its unsecured (such as a credit card balance), you may be sued for the amount owed. The Fair Debt Collection Practices Act regulates third party collectors, and state law governs original creditors.

Dealing with delinquent debt can be depressing, infuriating, time-consuming, and complicated. Don’t try to do it alone if you are unclear about what you can offer or are afraid to pick up the phone.