How to Talk to Your Creditors When You’re Behind on Bills or Payments
Mike Poulin, a Level 2 Financial Trainer here at The Financial Gym uses his prior experience as a Debt Collector to describe how to talk to your creditors when you’re behind on bills or payments.
Unfortunately, due to the current world climate, many people are finding their financial situation can shift in the blink of an eye. A majority of people carry some type of debt, and when you see a decrease in your monthly income, or a complete job loss, keeping up on your bills can be challenging. Not only can it cause stress and anxiety but there can be a lot of emotions tied to debt and the sudden inability to pay those debts.
I am here to offer “insider knowledge” along with some tips and tricks for you to know while talking to your creditors. Previously, I was a Debt Solutions Specialist at a Credit Union in Massachusetts. Debt Solutions Specialist is just a fancy word for Debt Collector. While my job description was to collect on debts, I worked for a not-for-profit financial institution, so I also worked with our members to make sure they were not only paying us and getting current with their balances, but that they were making the right decisions for their personal financial situation.
When it comes to debt, and personal financial journeys, I have seen it all. I figured now more than ever this would be a good time to share my knowledge and information when it comes to talking to your creditors when you do fall behind on bills or payments.
Plan out a specific budget. When you’ve lost your job, or reduced household income - having a budget is going to be KEY to weathering the storm. In terms of debt and bills, list them in order of importance. Figure out which payments absolutely have to be paid on time. Depending on your situation these could include: mortgage, rent, car note, insurance, utilities. My advice is anything that is needed to live or has some sort of collateral is of higher importance.
Check your loan agreements. Prior to talking to your creditors check your loan agreements. Check to see what is stated about late payments. What are the penalties? Will your interest rate be affected? Understanding the loan agreements prior to asking for help can help you understand what legally they can possibly do or how they can help you.
Pick up the phone when your creditor calls. If you’re already behind, the best thing you can do is answer the phone when a creditor calls you. If they talk to you in person (while it varies state to state) they legally can’t call you again for a certain period of time. There are protections for you, if you pick up the phone. Also in my experience, if I actually got someone on the phone I usually could help them create a game plan, payment agreement, and help keep them out of my queue. The people that I couldn’t help never answered my phone calls, sometimes even blocked my number.
Kindness is key. Money can be an extremely emotional topic, especially when you’re behind on bills. Remembering that the person on the other end of the phone, is just a human as well can make the experience more pleasant for both sides. I was much more willing to help the person who was courteous or respectful, than those who were not as kind. Kindness can go a long way.
Create attainable payment promises to your creditors. Setting expectations is important in all aspects of your life. Creating attainable promises to pay with your creditors is important. If they suggest a plan you can’t keep, let them know. Tell them what is reasonable for you within your budget.
Stay in contact with your creditor. Staying in contact with your creditors is important, especially if your situation changes. By being on top of your bills and keeping your creditors in the loop, you are demonstrating responsibility and that you are serious about fixing your situation. Just like any successful relationship-- communication is key.
Breathe. Just remember, there’s only so much you can do. Sometimes people fall on extremely hard times, and there is no shame in consulting a bankruptcy attorney to see if that would help you. If you’ve fallen so far behind or feel like you are drowning in debt due to an income decrease-- bankruptcy can not only help your financial health but also your mental and physical health. While there is a lot of stigma around bankruptcy it can provide a “clean slate” for a lot of people who need it.
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