Issue Date: April 12, 2009
MoneySmart |
SHARON EPPERSON |
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What to do if you can't pay the bills
Our next MoneySmart (April 24-26) looks at: How long can you put off paying your debts?
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Overdue bills are piling up, creditors are calling, and you just don't have the money to make all the payments.
Don't hide. Your creditors will find you. Fess up. Call anyone you can't pay, explain your financial situation (job loss, illness) and have documentation to support your case. Then propose a resolution. "Most creditors will work with you if they know there's an endgame and that the problem won't present itself again in a few months," says Gail Cunningham of the National Foundation for Credit Counseling.
What should you pay first? If your mortgage or rent is late, don't pay the credit card company just to keep the phone from ringing. A late credit card payment will hurt your credit score, but foreclosure or eviction is a far bigger blemish on your record -- and you could lose your home!
How to Prioritize? First, pay essential living expenses such as the mortgage or rent, food, and electricity, heat and water bills. Then, cover work-related costs (child care) and any secured debts (car payments), and legal obligations (child support, taxes). After making these payments, tackle the credit card bills with the remaining funds.
CNBC correspondent Sharon Epperson is the author of "The Big Payoff."
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