Can’t pay your bills? Here’s what you should do

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Whether it’s because of a job loss or something else, not being able to pay your bills is stressful. Unfortunately, missing payments on your bills can have long-term consequences, such as your credit being negatively affected.

So if you’re wondering what to do when you can’t pay your bills, here are some straightforward steps you can take today to improve your situation.

1. Reevaluate your budget

The first step is to reevaluate your budget. You need to understand how much you have coming in (income) versus how much you’re spending (expenses). Break out your expenses into two categories: essential and nonessential. 

Essential expenses are anything you need to survive your daily life, such as food, shelter, utilities and transportation. Your nonessential expenses are costs that you could live without, such as cable, Netflix, subscriptions and eating out. Evaluate if there are any nonessential expenses you can cut out.

Next, look at any debt you have and understand the difference between secured and unsecured debt. If you can’t pay all your debts, you’ll probably want to prioritize secured debt first.

Secured debt is typically guaranteed by an asset, such as your mortgage (backed by your house) or your car loan (backed by the vehicle). If you don’t make the payments on these secured loans, you may lose your shelter or transportation.

You can’t afford to lose a roof over your head or the ability to drive to work, so these secured debts should be a priority. In comparison, unsecured loans like credit cards come with higher interest rates, but it might be better to miss these payments in the short term. 

Rather than becoming overwhelmed by all your debts, consider implementing the debt snowball method. This method has you write down all your outstanding debts from smallest to largest.

From there, any extra money you have goes to the smallest debt first. As you pay off each debt, you work your way down the list.  

Experts prefer the debt snowball method because it helps individuals see real progress and stay motivated on their debt-payoff journey. Financial planner and founder of personal finance site, ThefinU, Chrisanna Elser advocates for the snowball method.

Elser states this method “is the most accepted method by psychologists because it rewards you for terminating one debt at a time in its entirety […] The little wins will keep you focused.”

2. Make the minimum payment

All your debts come with a minimum payment. If you can make the minimum payments on all your lines of credit, that would be ideal. Many people don’t realize that it’s better to make the minimum payment on everything than to make a full payment on one thing.

When you miss your minimum payments, it damages your credit score, which can have a long-term impact on your ability to obtain credit in the future. If you miss payments several times, you may even find yourself dealing with collection agencies or facing a lawsuit and wage garnishment. 

3. Reach out to your creditors

Take this step as soon as you know you might not be able to pay your bills (rather than after the fact). Tell them your situation and when you might be able to make regular payments again.

When you show your creditors you’re aware of the problem and making plans to address it, they’re often willing to work with you. 

Ask about options like loan forbearance, deferment, getting on a payment plan and waiving late fees. In response to the COVID-19 pandemic specifically, many creditors came out with “accommodations,” or types of debt relief, for people who struggled with bill payments.

Accommodations can include lower interest rates, delayed payments or decreased minimum payments, among others.

4. Get outside help

If you don’t know how you’re going to pay your bills, try to accept that this is not the time to be too proud to ask for help. Whether it’s from family or friends or professional credit counselors, you might need to seek help from others.

Support can come in many ways. Friends and family may offer you a loan to help you get back on your feet, offer to babysit your kids for free or drop off food for you. 

On the other hand, credit counselors can provide professional financial help. Credit counseling agencies offer people help for getting out of debt. This can include building debt payment plans and even contacting your lenders and negotiating better loan terms on your behalf.

Help is available, so make sure to take advantage of it—but make sure to do your research and ensure you’re working with trustworthy companies and individuals. 

5. Consider bankruptcy

When we mention the option of bankruptcy, it’s important to note that it isn’t for everyone. It comes with financial consequences that will follow you around for years to come.

You’ll have to rebuild your credit, and that will take time. Still, if it feels like there are no other options, bankruptcy can help. Filing for bankruptcy can wipe away many (but not all) debts and stop creditors from coming after you.

There are two types of bankruptcy filings: Chapter 7 and Chapter 13. You can talk to a lawyer to understand which path is best for you. 

6. Watch your credit

As you figure out how to pay your bills and get out of your current financial predicament, you must keep an eye on your credit. If your credit continues to decrease, creditors will be less willing to work with you in the future, making building a solid financial future more challenging. 

The five main factors that impact your credit, in order of importance, are payment history, amounts owed, credit history length, credit mix and new credit. As you follow a plan to get out of debt, try to keep these five factors in mind so you can improve your score as quickly as possible. 

Additionally, keep an eye on your reports so you know how your credit is being affected. For example, your credit reports could reveal that a lender sent your account to collections even though you paid them in full or had arranged a payment plan with them.

As soon as you see these types of errors, you can act quickly to rectify them and have them removed from your credit report. 

Or if you’ve already experienced hits to your credit, check your reports to know where you’re starting from as you try to rebuild or repair your credit. Just as paying off debt can be motivating, watching your credit improve can be motivating as well. 

No matter how bad your situation may feel, you have options that can help you. As you start to take back control of your finances and debts, prioritize your credit at the same time.

A strong credit score can help you ensure you have lending options in the future if you ever need credit. The credit repair consultants at Lexington Law Firm can work with you to analyze your credit report to make sure it’s accurate. Get started today. 

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Reviewed By

Paola Bergauer

Associate Attorney

Paola Bergauer was born in San Jose, California then moved with her family to Hawaii and later Arizona. In 2012 she earned a Bachelor’s degree in both Psychology and Political Science. In 2014 she graduated from Arizona Summit Law School earning her Juris Doctor. During law school, she had the opportunity to participate in externships where she was able to assist in the representation of clients who were pleading asylum in front of Immigration Court. Paola was also a senior staff editor in her law school’s Law Review. Prior to joining Lexington Law, Paola has worked in Immigration, Criminal Defense, and Personal Injury. Paola is licensed to practice in Arizona and is an Associate Attorney in the Phoenix office.