What to Do if You Fall Behind on Bills

Falling behind on paying your bills is one of the more stressful situations anyone can find themselves in — and it’s a circumstance many consumers can relate to.

According to an October 2024 Bank of America Institute report, 26% of American households are living paycheck to paycheck, meaning their necessity spending is close to their total incomes.

If that’s you, and you’re struggling to pay bills, keep reading to learn about the options to stop the financial bleeding.

[Related:Tips to Avoid Living Paycheck to Paycheck]

What to Do If You Fall Behind on Bills

If you fall behind on bills, the most important thing to do is to stay in touch with your creditors and let them know when you’ll be making a payment.

“The primary goal of the company you owe is to get their money. They want to keep you paying in some form or fashion,” says Lamar Brabham, CEO and founder of Noel Taylor Agency, a financial planning firm in North Myrtle Beach, South Carolina.

“The last thing they want is to write off your account as uncollectable. If you approach the situation in a business-like manner and sincerely ask for help in formulating a plan to repay the debt, you have a much better chance of weathering the financial storm,” he adds.

Here are seven steps to take if you’re falling behind on your bills:

1. Make a List of All Your Bills

Holley Cary, a certified financial planner and vice president at First Horizon Advisors in Memphis, Tennessee, suggests making a list of all your bills, both those that are late and on time, “along with dates of payments due, interest rates and balance details.”

If you don’t have a list of all of your bills it’s easy to forget about certain monthly expenses you may pay for but no longer need, and it’s also challenging to keep everything straight.

2. Figure Out Your Cash Flow

Find out exactly how much money you have coming in each month.

“Set priorities based on cash flow,” Cary says. “You’ll want to cut back any discretionary spending until overdue bills are caught up.”

Having a consistent cash flow should also mean fewer unpleasant surprises, like running out of money with several days to go before your next paycheck.

[Related:How to Be Master of Your Cash Flow]

3. Prioritize Your Bills

Lisa Whitley, an accredited financial counselor and chartered retirement planning counselor who lives in Washington D.C., points out that not all bills are equally important. For example, subscribing to a streaming service isn’t as importantas paying off as your mortgage.

And even when you get to other bills like credit cards — which are certainly important to pay on time — it may not be as important as, say, your car payment.

“If you’re at risk of falling behind on your car payment, then you’re at risk of losing your car, perhaps more quickly than you imagine,” Whitley says.

“If you rely on your car to earn a living, this can cause a cascade of financial problems. Prioritizing this payment over other payments such as a credit card may make sense. This triaging approach extends to your rent and mortgage payments,” she adds.

A prioritized list of bills might look like this:

— Rent or mortgage

— Car payment

— Insurance payments

— Utilities

— Cellphone

— Credit card payments

— Student loans or other personal loans

4. Contact Creditors

While Whitley suggests prioritizing your payments, “lower priority doesn’t mean ignore.”

She says to contact your credit card companies to arrange for alternate payment arrangements if you’re falling behind.

“This may mean that your account will be closed to further purchases. However, it can forestall mounting late payment fees and repeated phone calls from debt collectors,” she says.

Cary says to talk to creditors before there’s a problem and alert them about your financial situation. She also says that if you ask, you might be able to get late fees reversed, an interest rate adjustment or the opportunity to set up a payment plan.

Remember, creditors want to be paid back, and so they know it’s not in their best interest to make your financial situation harder than it already is.

5. Aim to Pay the Least Number of Bills Late

If you choose a low-priority, low-interest account to skip or delay a payment, you may do less damage than if you’re consistently running late on all of your bills.

For instance, if you have a credit card bill with a $50 monthly minimum and you could pay every other bill on time if you skipped it, you may want to let it go for a few months. That way, you’d be behind on only that one account.

If you’re paying a credit card bill late, however, it will damage your credit score, so you may want to consider working with a credit card counseling service. At the very least, notify your credit card company that you’re struggling.

[Related:U.S. News Editors Share How to Avoid Credit Score Drops in the New Year]

6. Consider Other Income Sources

“Until things are back on track, you may need to look at additional income sources, like part-time work,” Cary says.

You could also ask a family member or a close friend for a low-interest or no-interest loan. It may be an unpleasant or stressful conversation, but if you think you can pay them back, it might be worth asking.

7. Avoid Going Into More Debt

It might seem like a good idea to take out a payday loan, a personal loan or another credit card to cover your bills, but typically that’s not the way to go.

If you take out a high-interest loan that you have to pay off in a couple of weeks, it’s a short-term solution. If you can’t pay it back on time, it turns into a long-term problem.

More from U.S. News

Tips to Make Ends Meet During High Inflation

What to Do When You’re Deep in Debt

10 Easy Ways to Save $5 a day

What to Do if You Fall Behind on Bills originally appeared on usnews.com

Update 01/22/25: This story was published at an earlier date and has been updated with new information.

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