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I’ve been reading a lot about the looming student loan crisis lately. Apparently, Americans have more than 1 TRILLION dollars worth of outstanding student loans! Student loan debt now outranks credit card debt and auto loan debt for the average consumer and comes in second only to mortgage and rent payments.

With all of this debt and the abysmal state of our economy, it’s unfortunately not a surprise that people are beginning to default on their student loans. Worse, some people are simply deciding not to pay their student loan bills (as well as others such as credit card and personal loan payments).

Not Pay Your Bills….On Purpose?

After reading this, I began to wonder if there’s ever a time where I’d not pay my bills on purpose. Luckily, I’ve always had my head on straight when it comes to paying my bills on time. Sure, I’ve made some technical errors and scheduled payments for the wrong dates and I’ve had things get lost in the mail before, but I’ve always been able to have any late fee removed from my account(s) because I have a solid payment history.

This wouldn’t be the case had I skipped payments or missed them on purpose. After all, bad financial behavior is usually rewarded with negative consequence such as fees, credit score reductions and an inability to finance the things you want to buy at a low interest rate.

But what about if you find yourself in dire straits when it comes to your finances? What if you’ve experienced an accident or illness and have no savings or insurance? What if the reality is that you just have no money? Then what?

Not Being Able to Pay Your Bills

Most people who find themselves in this serious of a situation tend to throw in the towel and/or bury their heads in the sand. When things are so bad that you don’t know where the next dollar is coming from, it’s understandable that you’d want to deny the situation. When it comes to finances (as with most things), the problem with denial is that is just makes the situation worse!

If you truly cannot pay your bills, there are options out there. First and foremost, you have to realize that these are not good options in terms of their consequences and this is not a recipe for how to be a financial deadbeat–these are the choices you can make when in a desperate situation that can help you eventually dig yourself out of whatever mess you’re in—but only if you commit to working hard!

Realize Not All Debts are Created Equal

Do you have secured debt or unsecured debt? Perhaps both? Each of these types of debts need different approaches to dealing with them if you’re having a hard time paying your bills. Because secured debt is often tied to some type of collateral (your house, your car, etc), those are the bills you should try to pay first. For unsecured debts such as credit cards and medical payments, the lender/organization must first sue you before they can take any actions such as wage garnishment, etc. This essentially buys you more time to figure out your situation.

Again–note that this is a method to be employed during desperate situations only! When you begin to skip payments, your credit score will tank, the late fees will stack up and you’ll be facing a bigger hurdle to clear.

There is Relief

Debts such as mortgages and student loans may qualify for government assistance. If you can’t pay your bills, consider applying for a financial hardship or forbearance. While it’s not a permanent solution and you will still have to pay those loans back, the process can allow you time to get your financial house in order before the next payments are due.

Just remember that mortgage lenders can foreclose on you in as little as three months–ensure you’re doing your best to get back on track with payments ASAP!

Communication is Key

No matter what your situation, if you’re having a hard time keeping up with your bills, COMMUNICATE. Call your lenders, ask if there are any special programs, have them note on your account that your next bill will be a bit late. The more you communicate in an open, honest way, the better your chances of getting some help during this difficult time.

The Bottom Line

All of these options are temporary, short-term solutions to get yourself out of a bind–they are not part of a sound financial management plan. You can’t live and behave this way forever, so make sure you’re doing everything in your power to cut expenses, bring in more money and seek help where possible.

Would you ever not pay your bills on purpose?

 

Photo credit: xJason.Rogersx