We are over extended and we’re having trouble paying our bills. We owe more each month then we have coming in right now. What do we do?

The first thing that you need to do is talk to your creditors. When you receive a collection call from a creditor, take it and talk to them. Explain your situation and see what type of arrangements can be made. ALWAYS KEEP THE LINES OF COMMUNICATION OPEN!!

There are several types of arrangements that you may be able to negotiate. Sometimes it will depend on the type of debt you are trying to make arrangements on. (i.e. credit card, installment loan, mortgage, equity loan, and is the debt secured or unsecured, etc.)

Being over-extended is very stressful. Sometimes you feel like you are robbing Peter to pay Paul. Have you heard that saying before or am I showing my age…lol It’s more stressful to keep ignoring the calls and putting your head in the sand and pretending they do not exist. When you ignore the calls, it leaves the collector’s no option but to take further action to collect the debt. It is better to work with them, then to ignore them.

If you are behind on an installment loan payment then you may want to make arrangements to pay 1.25 payments for four months if you are running one payment behind. The further you get behind the harder it is to get caught up. You need to look at your budget and see what you can realistically pay so you will be able to keep your promise to pay. When you promise to pay 1.25 payments for four months, you need to keep that promise. The collector will mark your account accordingly and they should not bother you as long as you are paying as agreed. If you cannot make that payment, then you need to call them and let them know and see what can be worked out. You need to keep in mind the collectors are just doing their job. They will work with you if you are honest, trying and keeping your promises to pay. Depending on the reason for delinquency, you may be able to get a loan modification where they will add the payments to the end of your loan. You may also be able to work out an interest only payment for a month or two.

If you are trying to do a work out on a credit card, you may need to ask them if they will reduce the interest rate that you are currently paying on the card, freeze the account and begin paying the account down. Sometimes the creditors are able to reduce your monthly payment, and reduce your interest and/or zero out your interest in order to collect the balance on the account. The options that are available to you will depend on how far behind you are, how much you owe and how many times you have been delinquent prior.

Is your mortgage delinquent? Have you talked to the bank? Again, depending on how far behind you are will depend on what arrangements you will be able to make on your account. If you are running approximately one month behind, you may want to see if the 1.25 monthly payment for four months is acceptable in order for you to bring your account back to a current status. If you can do 1.5 payments that is even better. The further behind you are, the harder it is to get caught back up. The collector will take everything into consideration while they are working with you. Why are you delinquent? Health reasons, job loss, etc. If you are honest with them, they will typically do their best to work with you. However, there are internal guidelines that need to be followed during the collection process. There are items of due diligence that need to be followed especially if your loan is backed by Fannie Mae or Freddie Mac, USDA, etc. Believe it or not, the financing institution really does not want your house. They are in the finance business and not the real estate business. But, once an account reaches a certain stage of delinquency, (i.e. 90 – 120 days delinquent) they may be required to start the legal foreclosure process in order to ensure a recovery on their loan by the insured party (Fannie Mae, Freddie Mac, etc.) and to be in compliance with financing regulations. Some financing institutions will do a forbearance agreement. This will depend on the institution.

Everyone goes through hard times throughout their lives. Life happens and sometimes things are out of our control. This does not mean that you are a bad person. It just means that you are experiencing some financial challenges and you need to work through them. I’ve always said that people are just broke on different levels.

As this Blog continues, we will be looking at repossessions, foreclosures, collectors and their jobs, Consumer Credit Counseling agencies, Charge Off’s, Bankruptcy, credit bureaus, rebuilding your credit, third party collections, legal actions, law suits, judgements, garnishments, attachments, liens, settlements, etc.

I’ve been working within the collection industry in various capacities for over 30 years and there are ways to work through your financial challenges and get back on your feet. It will take some time. It will not be pain free. But, it is possible. Looking at your financial situation as a whole and determining which financial road to recovery is going to work best for you is the key.

Check out the Blog under Finances and let’s start taking a look at your spending habits and your income and see if we can help get you back on the right road. You may need to work a second job temporarily, cut back on your purchases, sell some of your things, etc. But, financial freedom can be achieved!