Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).
Dear To Her Credit,
My husband and I fell behind on our bills. Mortgage, cars,
credit cards -- you name it, we fell behind on it. We're trying to get out of
our rut, but it's just really hard. We have three children: a 2½ -year-old and
7-month-old twins. Our kids come first as far as spending our money. So we fell
behind on some bills and now trying to catch up just seems impossible.
Every bill we get in the mail has late fees and over-the-limit
fees. How can we catch up on our bills if they just keep tacking on all these
fees? We are behind a few months on our mortgage; I am scared that we will lose
our house.
All we want is a good life for our kids. A roof over their heads,
food, clothes. This day and age it's just becoming too hard. We can't file for
bankruptcy because we did that three years ago. I really just don't know what
to do.
I think we might have to sell our house and rent one
instead. That is even if we can sell it. Our mortgage just keeps going up.
Please help with any advice that you have. -- Virginia
Dear Virginia,
Your story demonstrates the futility of filing for
bankruptcy without solving the underlying problems that get people into debt in
the first place. Your experience is not unusual.
For one thing, bankruptcy is filed as of a certain date. The
court may not even discharge (get rid of) debts from bills too close to the
bankruptcy date. The bankruptcy process takes a while -- and by then many
people are far in debt again. And then some debts, such as child support and
most taxes, are not dischargeable at all.
You are in a desperate situation. Small steps like cutting
back on lattes or saving change are not enough. When you are "a few months"
behind on your mortgage, you could indeed be very close to losing your house.
The first thing to do is find out exactly where you stand.
Make a list of all your bills and how much you owe on them, including amounts
past due. This step is very important; you need this information for your next
step.
Next, look at your options. These are potentially drastic options,
but that's what you need:
Sell
one or both of your cars. If you have two cars, sell the one with the
biggest car payment. If you live near a bus line, you can probably get
along without a car for a time.
Rent
out your house. If you can get enough rent to cover your mortgage payments
and taxes, that's one way to avoid foreclosure. You can stay in an apartment
or even with your parents, if that's an option.
Sell
your house. Set a reasonable price so it sells quickly.
Sell
other items of value, such as a motorcycle, boat or travel trailer. Or
have a garage sale.
Adjust
your income tax withholding. If you always get a refund, file a new Form
W-4 with your employer and claim more exemptions.
Work
more hours, or take temporary or seasonal work. Every dollar helps.
Regardless of the other options you choose, be sure to stop
all money leaks, starting today. Resolve never to pay another late fee -- you
have to make the payment, so make it on time. Get rid of excess or overlapping
insurance (don't skimp on the insurance you need!). Cut out unnecessary
spending like junk food and stress shopping. Spending money only causes more
stress in the end.
Resist the urge to spend money unnecessarily on the kids. I
remember when my kids were little, and it seemed like everything we bought was
for them. But kids actually need very little. Having parents who are not
stressed out over money will do them more good than all the latest toys and goodies.
If this seems overwhelming, consider getting financial
counseling from a reputable nonprofit organization. This situation is a wake-up
call. Use it to start learning about personal finances. You'll be able to relax
and enjoy your growing family when you have control of your money and you know
you have a secure financial future.
Sally Herigstad answers questions about credit every week for CreditCards.com. Herigstad is a certified public accountant, author and speaker. She also writes regularly for MSN Money, Interest.com, Bankrate.com and RedPlum.com, and has been a guest on Martha Stewart radio and other programs. You can read more about personal finance and download free budgeting worksheets at her website: www.sallyherigstad.com
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
Published: January 9, 2009
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