Daisy Luther at The Organic Prepper has an article on How to Talk to Creditors When You Can’t Pay Your Bills. With some businesses closing permanently and others temporarily closed over the coronavirus pandemic, many people are put in an economic bind with no income coming in. While Washington state has announced some coming benefits for workers who are quarantined or laid off because of the coronavirus, we don’t know how long it will take to file, eligibility, or how it affects hourly workers who are not laid off or quarantined, but are not working because they business is closed or slow.
As our economy gets rocked by the coronavirus outbreak, lots of folks are already beginning to have financial problems. For others, they see money trouble on the horizon.
These issues are occurring for several reasons. Some businesses are cutting back staff or hours preemptively so they can survive financially. Other businesses are laying people off because of supply chain shortages – if you can’t get parts to repair furnaces, you can’t pay people to repair furnaces. The travel and shipping industries are already feeling the pain from the global outbreak.
So if you aren’t having money problems now, it’s very possible you will be soon.
What to do when your income slows down
This is something I’ve written about in detail in more than one article. Here’s a detailed article about job loss but the strategies would also work if your hours are cut. The basics are:
- Know your rights. You may have some recourse if your hours are cut or if you are laid off. If you have any type of employment contract, now is the time to go over it with a fine-tooth comb. Don’t sign anything until you’ve taken the time to calm down and think things through.
- Begin a total spending freeze. Give it a couple of days before you spend a dime. You’ll need to re-assess your budget.
- Apply for unemployment. Whether you lost your job completely or your hours were cut, you may qualify for unemployment or other benefits. You’ve been paying taxes for just this reason, so don’t be too proud to accept the help.
- Create a budget for necessities. Sit down and create a budget for the absolute bare minimum expenditures.
- Slash luxury spending. Now isn’t the time to go on a vacation, join a gym, or eat out at restaurants.
- Look for new streams of income. If you can, look for odd jobs, start a small business that doesn’t require an investment, or use your expertise to begin consulting in your field.
- Sell stuff. All that stuff you’ve been meaning to go through in the basement just might be the key to keeping a roof over your head. Sell things online or in person, keeping in mind your personal safety.
- Audit your budget. Take the time to see where you can slash your spending. Can you cut your fixed or variable expenses?
Take action right away to stop the bleeding of money. A few dollars may not seem like much right now but it could be a much bigger deal in the future. You may need to make drastic cuts.
Make a list of your creditors.
Once you have created your new emergency budget, it’s time to take a look at those to whom you owe money. Some of these will be necessary expenditures. Keeping a roof over your head, the utilities on, a car in the driveway, and remaining insured. are likely the most important expenses.
Other expenditures are things like unsecured debt: credit cards, student loans, and personal loans. You may have some secured debt on things with which you’re willing to part – second cars, recreational vehicles, etc.
Write down all these expenses, your account numbers, your minimum monthly payments, and contact information for the creditor.
Before anybody jumps in and says, “You shouldn’t have any credit card debt” or “I bought my car in cash,” remember that I’m writing about a change in circumstances here. Sure it’s better to be debt-free, but when you have found yourself in a crunch, it’s all about surviving the rough time, not about beating yourself up for previous decisions.
Contact them one by one.
Next comes the part that may be difficult for some – you need to contact your creditors and see if they can help.
Keep in mind that many people are running into difficulty right now and these companies know it. Some places may have already authorized negotiations with debtors in expectation of the difficulty in which you currently find yourself.
Contact them in order from most essential to least. Below you’ll find some tips to help you guide the conversation.
How to talk to creditors… (continues)