Dealing with Bill Collectors - What to Do when Bills Get Out of Control

When you get to the point where you're taking money from one credit card to pay the bill for another credit card, you are in serious trouble. When you get to the point where you're afraid to answer the phone because it might be a bill collector or go to the mailbox because you won't be able to carry all of your bills, you are in serious trouble. And when the bills mount to the point where you're searching through several months' worth of them to find which bill is the most overdue, you need serious help.

Here are some tips for dealing with bill collectors and for helping with debt:

Credit Cards

The short answer is: don't use them. Using them is the fastest route to getting "bad credit." Too late? Think about this: If you pay only the minimum balance, depending on how much you owe, you could spend decades paying each bill. What that translates to is that you will, in some cases, pay for items ten times over - or more. What can you do?

First try paying double the minimum balance plus whatever interest is owed. Then call those same creditors you are trying to avoid. While some credit collectors are oddly frightening, demanding, and dictatorial, not all of them are. Don't be afraid to talk to them. Explain that you want to pay your bill, but that after mortgage or rent, childcare, food, insurance, and utilities, you are left with only a few dollars each month, and that sometimes you are left with nothing.

By initiating the call, you are showing them that you are conscientious about paying your bills. If you explain that you owe money to fifteen other creditors, they might offer you a payment plan.

Working With Creditors

Debt collection is serious business, and debt collectors take their jobs very seriously. Some creditors will work with you in paying down your debts. Others won't. Thank the cooperative ones for their willingness to work with you. Despite your best efforts, though, some credit collectors will refuse to accept any payment at all unless it's a full payment - regardless of your situation. Pay something anyway.

Several years ago, when my children were small enough to warrant buying a new wardrobe every season, and because my expenses far exceeded my income, I depended on credit cards to buy clothing and food. I borrowed money from my Discover card to pay for part of my Sears bill. But when I called Sears to ask them to help me by accepting lower payments or by lowering the interest rate, they refused.

Other creditors told me that as long as I paid something every month, they wouldn't send me to collections. Today some creditors are offering something even better - write offs!

Hospitals and Doctor Bills

Many times, when you end up in the hospital or in the emergency room, you receive bills from doctors, radiologists, phlebotomists, x-ray technicians - the list goes on and on.

People you never saw send you bills because they read your x-rays or analyzed your test results. One day in the hospital can cost you thousands of dollars, and if you're already in financial distress, the bills that result from one visit can be devastating and insurmountable.

If you call your doctor and/or hospital to explain your financial situation, they may decide to "write off" a portion of your bill - if you're lucky. Tell them that - at this time - you can pay only $x per month. Make sure you follow through on your promise to pay the amount YOU suggested. If they tell you that the amount you've chosen is unacceptable and that unless you pay the entire bill, they won't accept anything - yes, that actually happens - send them money anyway. I had five different doctor bills from five different sources. Each one consistently received from me (and is still receiving from me) $10 a month. The defining word is consistency. If you pay a bill CONSISTENTLY each and every month WITHOUT FAIL, even if the doctor or hospital sends you to collections, you can prove that you are attempting to pay off your balance - consistently.

Admitting Defeat

Sometimes you find yourself falling so hard and so fast, you see no way out of your debt. Like me, you work very hard at the only job you can find, a job that pays little more than minimum wage. Maybe you're not getting enough child support to sustain you, or maybe your husband or wife just lost his or her job. Maybe your rent has gone up so high you can no longer afford to live in your home, but you have no money set aside for moving expenses either. If, like me, you've used your Discover Card to borrow money to pay your Sears bill, and you've paid for your groceries with credit instead of debit, each month pulls you further and further behind while each month your stack of bills grows higher and higher.

You find yourself borrowing money from your Discover Card to pay a portion of the balance left on that same card. Just getting through the day is so painful and so exhausting, all you can see ahead of you is more of the same. Aren't you getting tired of listening to the phone ring several times a night? Aren't you tired of struggling to retrieve mail that is stuffed so tightly in your mailbox that the post office can't fit any more mail in it? Isn't it time to admit that no matter what you do, nothing is working? Admit it - you need help.

Credit Counseling Help

A credit-counseling agency gathers all of your bills, matches your debits to your credits, and offers debt relief suggestions. But even credit counseling agencies can't help everyone. When the Consumer Credit Counseling Agency told me that the only way I could get out of debt was to get two full-time jobs, one of which would pay for daycare expenses, and demand my ex-husband to pay what he owed in child support, I knew I was doomed. The alternative? Claiming bankruptcy - something I didn't want to do - something I didn't want to admit that I had to do - but something I had to do.

Sometimes even after having gone through loan consolidation, debt consolidation, or debt management, because of the direction the economy has gone, you can't help but find yourself slipping back into debt.

Hopefully you are not as far-gone financially as I was and you can take advantage of the services credit counseling agencies have to offer. Contact The National Foundation for Credit Counseling to get a referral for an agency near you.

Claiming Bankruptcy

If you find that the only way out of your mountain of debt is to claim bankruptcy, you will probably require the services of an attorney. But attorneys require money, and that presents another problem.

When I asked my attorney how I could pay her without any money, she told me I would think of a way. So how did I get money I didn't have? Though I hate to admit it, I borrowed the money I needed from one of the credit cards I was claiming in the bankruptcy. I'm not advocating using this method to claim bankruptcy, but nobody had money to lend me for the attorney, because everybody kept lending me money to help pay my bills. The attorney refused to work pro bono for me and my debt was so abysmal, I knew I would eventually lose everything I owned, including the mobile home in which I was raising my children, if I didn't claim bankruptcy. Today people in my situation have more options.

Filing Bankruptcy Yourself

Back in the mid 90's I didn't have the same kind of access to information about filing bankruptcy as I would today. Government agency web sites offer solutions to numerous problems about a variety of issues. USCOURTS.GOV is one of those government agencies.

To file bankruptcy without an attorney, go to USCOURTS.GOV.

And for the required forms (different section of the same site), go to USCOURTS.GOV.

In Closing

Credit card debt can have devastating consequences. But don't be afraid of bill collectors. Educate yourself about your own finances. Sometimes trying to find a job that pays enough to cover your expenses can be difficult if not downright impossible. But knowing how much money you need to make is the first step toward affording your life.

When looking for a job, figure your monthly expenses (see link below - it addresses EVERY CONCEIVABLE expense you might encounter), including, not only everything related to housing and automobile bills, but also entertainment and unexpected wedding and graduation presents. One of my biggest expenses, because of the number of children and grandchildren in my family, is my gift account.

Don't forget to allow for savings. Try to find a job that pays at least 28% MORE than what you NEED. Remember tax time comes around at least once a year (depending on the type of business you're in) and Uncle Sam demands his share.

Above all, watch your spending and cut up those credit cards! Learn the difference between what you want and what you need.

To help with debt management and to figure your expenses, get Suze Orman's FREE Action Plan Expense Tracker to find out how to get your money back on track so you won't have to deal with bill collectors anymore. Included in the expense sheet is an alert that lets you know if what you are spending is above or below the national average.

And finally, be proactive about financial planning. Consult a financial advisor or a financial planner to learn how to prevent yourself from ever getting into debt in the first place. If you'd rather start online, visit Suze Orman at http://www.suzeorman.com/. She is a financial consultant genius who offers books, seminars, and even a link to her free iTunes program.