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by Aaron Ralston
If you find that you are not able to pay your creditors the first thing you need to do is to talk to them. Never avoid them, thinking if they cannot reach you then it does not matter. This will lead them to think that you are avoiding them,

If you find that you are not able to pay your creditors the first thing you need to do is to talk to them. Never avoid them, thinking if they cannot reach you then it does not matter. This will lead them to think that you are avoiding them, and they will take further action to collect the debt. The best route to take is to call the creditor ahead of time and explain your current financial situation if you are having problems making payments. Creditors are usually very helpful, and they will set up an alternative plan so you can make the payment without them reporting a default on your behalf to credit bureaus. On top of talking to them, send a letter to them summarizing your situation. Send it return-receipt so you know they accepted your copy for your further reference. It is also important to pay the debts, such as rent, utilities etc. first. These debts are more important and can affect you immediately. By following the outlined guidelines listed below, you will set up a process to help you overcome your short-term debt.

Important Guidelines to Remember

1. Pay the most important bills first. These include rent, utilities, car loans, and other loans. Other debts can wait for a while.

2. Compare interest rates on the credit cards you own, and pay off the higher ones first. Also look to see which ones will significantly increase if you miss a payment. By paying the cards off with higher interest rates, you will save money in the long run.

3. Talk to your creditors to set up a new plan for paying off your debt. Most creditors will work with you, lowering your monthly payment until you can catch up.

4. Get counseling help if you are having repeated problems. A professional who works with cases similar to yours will always give you new ideas on how to reduce your debt expenses.

5. Debt consolidation. You also have the option of obtaining a loan to consolidate your debt. This is a great help because it will more than likely lower your interest rate, and you will only have one payment to make per month. Be careful though when using a debt consolidation company because you may end up paying a higher interest rate. If you miss even one payment, your interest rate will go through the roof. You will have to put up collateral such as a car or house when you use this method.

6. Try to make as large of a payment as you can to lower your debt. You are going to have to pay high interest for a period of time, but the faster you can get rid of debt, the more money you will save in the future.

7. Contact and join a support group such as Debtors Anonymous to help you cope with debt, and you will also be able to discuss and relate to people with similar problems as yours.

It can seem like a never ending and confusing situation to not be able to pay your bills. Remember not to panic, and seek help. Avoidance is not the key, and you will find trouble by ignoring your creditors.

What Happens if You Can’t Pay

If you miss a payment, you will experience increasing pressure from your creditor to pay. The sequence usually starts off with a courtesy letter reminding you to pay, followed by phone calls until you pay. As time passes, and you still can’t make the payment, the creditor will turn your account over to a collection agency. The agency is just a third party who purchases your account from the creditor for a certain amount. Collection agencies are usually very demanding, and can be quite rude sometimes. They have been known to make threats and relay false information about what can or will happen if you do not pay them. It is very important that you know your rights and what can and will actually happen if you don’t pay the collection agency.

Know Your Rights

While a collection agency will try to get you to pay your debt, you have certain rights that they have to respect or they are liable for legal action against them.

1. Always identify the caller. Write down his or her name, the collection agency they are with, the agency’s address, and the exact amount due. Record the date and time of each call too.

2. Always remain calm no matter how the agency’s debt collector speaks to you. If they use abusive language against you, record what is said each time. Do not speak the same way to them. If they report that you used abusive language, you do not a have a chance to stand up against them in court.

3. Always dispute your debt in writing well before the 60-day time period they give you is up. If you believe that you do not owe the amount that is being collected against you, write a letter to the agency stating exactly what the problem is and why you think the debt information is false. They will then have to investigate your letter before any measures can be taken against you.

4. If a creditor is harassing you, you have the right to write a letter to them requesting them to stop calling you. Under law, they must stop immediately or they can be sued for harassment. If calls continue, record the date, time, and who you are speaking to for your records. If you choose to take action against the creditor, you can sue for damages and lawyer fees.

Creditor’s Options

The sales contract you signed for your credit agreement has the specific information about what the creditor can and will do if you do not pay your bills. If you do not pay your bills your creditor has the option of acceleration. This will make your whole bill due immediately with no payment options. Courts may be able to force you to pay by filing a Writ of Execution against you, which will allow the creditor to take some of your personal property and sell it. The property available to the creditor differs from state to state. A creditor can also repossess the items you bought or the property you put up for collateral.


If you dispute your debt and the creditor still believes its' claim is valid, the creditor will more than likely have a lawyer contact you. You must answer the plaintiff’s complaint letter within 20 days stating what you agree or disagree on. If you do not, when the case goes to court, you will automatically have a judgment against you, which may allow the creditor to garnish your wages and take some of your personal property. The creditor has ten years to collect the debt from you, with one more renewable ten-year period.

Other information can be obtained from the Federal Trade Commission:

Federal Trade Commission Division of Credit Practices Pennsylvania Ave. at Sixth St. NW Room 4037 Washington, DC 20580

They will help you by further explaining your rights as a consumer, and by referring you to different counseling agencies located in your state and area, and dedicated to helping you overcome debt.

To avoid the huge mess of going into debt, simply communicate with your creditors, letting them know way ahead of time about financial problems you are or will be having. This will save the huge headache of having to go to court to settle a debt claim, and some embarrassment. It will also help to protect your credit score. A credit report that has default judgments on it will not likely be a report that a lender will be willing to work with. They do not typically stick out their neck for liabilities.

Aaron Ralston is the owner of The Financial Guru at His website is dedicated to helping you solve your financial problems by providing you with the free information you need to get your credit straight, make investment decisions, and create your own financial plan.

The site is not responsible for any content in it. E-mail: alldir[at]gmx[dot]com
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