How To Work Out A Deferred Payment Plan If You Can’t Pay Your Bills

by Silicon Valley Blogger on 2010-10-264

Job losses, out of control mortgage payments, and being overextended are just a few reasons why people are walking away from debt in droves and becoming debt averse. Isn’t that the silver lining behind economic downtrends, recessions and a high unemployment climate? Car loans, home mortgages, and credit cards are just a few of the debts that people feel that they simply can’t afford any longer, such that more and more consumers are simply choosing to leave their debts behind, or are they?

So what happens if you’re up to your gills in debt and feel that you can’t manage to eke out payments any longer? You may be tempted to walk away from it all, but there may be things you can do that won’t necessarily lead to bad consequences.

How To Negotiate A Deferred Payment Plan

So, the question now is this: what bills can you defer or make arrangements on that will keep you out of the hot seat while making sure that you can still put food on the table? (that was a mouthful!)

1. Medical Bills

This bill is actually one of the easier ones to deal with. While most medical providers require that you pay for their services at the time they are rendered, you can usually cut a deal with them. The best way to get a payment arrangement set up is to offer a smaller payment on the day you receive services, say $20 to $40, and then agree to regular monthly payments after that. Here’s something to keep in mind while negotiating these payments: once you agree on how you’ll be paying them, then as long as you’re paying them something each and every month (even if it’s five bucks), they can’t turn you over to collections!

Tip: Note that hospitals are actually quite open to negotiating payments with their patients, especially if the patient does not carry insurance. Apparently, they make more money by charging you a direct bill of $200 for a procedure that normally costs $1,000 if insurance is involved! That’s because insurance companies may take in $850 of that money, leaving $150 to the hospital. That’s what I was told when I visited the emergency room recently!
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2. Taxes

Here’s one more bill that allows you a little wiggle room. Most taxing authorities, even Uncle Sam, want their money up front, but will accept payments if you can’t pony up the cash in one lump sum. The catch here is that in many cases, they can charge some penalties and interest on the balance, so your payment arrangement will end up costing you a bit more in the long run. Once again, as long as you are paying these guys something, they won’t give you too hard a time — unless you violate a payment agreement to the Feds. In this case, if you say you can pay a certain amount, it’s a pretty good idea to stick with it. You can be late on a payment to them without much fuss, but missing one or two will garner you a nasty letter threatening to seize your assets!

3. Unsecured Debt

This category covers your credit cards and personal loans. These bills can be a bit tricky: while you may not feel any immediate negative consequences for skipping out on your payments, at some point, your bills will catch up with you and the negative impact will take its toll. Late fees, higher interest and higher monthly payments will all start to accumulate if you miss a payment or two. Your credit will take a big hit as well. I wouldn’t suggest missing these payments at all if you can help it, but you can make a payment that is less than the minimum if you absolutely have to. You’ll avoid late fees and other penalties by doing so, and be able to keep a few extra bucks in your wallet. Or you may present yourself as a hardship case to your credit card issuer or lender and figure out how you can lower your credit card interest rates or bills while still honoring your obligations. Could there be a win-win here somewhere (or at least, not a win-lose)?

Tip: Using a payment system like the Chase Blueprint Card Payment Program may help you organize your card payments and pay schedule better. If you’re a customer of a card company like Chase, check to see if they’ve got tools like this that can help. Other tools that can help you manage your bill payments better include those offered by online banks or sites (e.g. see the online bill pay account from FNBO Direct or this online debt management tool by SavvyMoney).

4. Bills That Aren’t Yours

If you’re a surviving family member, you may expect to receive a call from a lender of a deceased family member claiming that you owe on their behalf. But this simply isn’t the case. Even if you were married, if the debt is only in the name of the deceased spouse, then you aren’t responsible for paying it, no matter what the collector says. So don’t give in and pay these debts. Now, if the debt is secured, meaning that there is personal property attached to the debt, then the lender can legally take possession of the collateral if this debt isn’t paid and nothing is done about it. However, communication with your lender may alleviate this threat.

So Should You Defer Payments?

We all know what happens when you stop making your mortgage payment. The bank forecloses on the loan, takes possession of the house and then sells it at auction. Everybody’s happy, right? Wrong. What you may not know is that when a mortgage is foreclosed upon, few homes actually sell at auction. The bank is then forced to carry the home for weeks, months and potentially years before it sells. In most cases, the sales price is a bunch less than what you owed, making you responsible for the difference. You get sued and have to pay money on a house you don’t even live in any more. Plus, it’s a double whammy when your credit suffers AND when the bank now has the ammunition it needs to have your wages garnished. The same holds true for car loans and even credit card debt. So instead of being hostile to your lenders and abandoning payments, why not work out something with them and try for a more cooperative, amicable arrangement?

Under no circumstances should you try to defer your mortgage payment, utility bills, transportation bills or other necessary and vital needs without working out a hardship deal with your lender; otherwise, you might find yourself out in the cold. But for unsecured debt, medical bills, and taxes, you have some wiggle room… so use it!

Copyright © 2010 The Digerati Life. All Rights Reserved.

{ 2 comments… read them below or add one }

Carol Spence October 30, 2010 at 8:22 am

been on long term unemployment and i already tried this sort of thing. My experience is that they will work with you if you give them enough details. I was let go for 2 years now and have no more savings to speak of so I’ve talked to the companies and they are giving me a break.

Silicon Valley Blogger October 30, 2010 at 8:32 pm

That’s great to hear! I found that good communication with your lender works, but you’ll have to have a good relationship with them. They want their money and for the most part, would rather work with you as much as possible. Different lenders employ different ways to make sure they get paid — through positive or negative incentives. I would think that positive motivators would work better!

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