How To Deal With Creditors When You Can’t Pay

I wanted us to deal with the issue of how to deal with creditors when you can’t pay. It may sound a remote possibility for many but events of the last few years have shown that no one is immune from this.

It is therefore important that we all learn in advance on what we can you do. This is a must-read for those already in a situation where they cannot or struggle to even pay essential bills.

As I am writing this we are going through a pandemic that has led to millions losing their jobs due to the stay at home orders. I have seen on television hardworking Americans crying due to the fact that they cannot afford to buy basic items like groceries.

Fortunately, the government has put in place measures to protect consumers from lenders. In fact, lenders have been advised to be very considerate in dealing with payment defaults.

As the economy is opening up things have improved a bit but we still have millions unemployed. I suspect that it may take a year or two before things go back to normal.

This is definitely a very stressful time for most Americans and people around the world.

How To Deal With Creditors When You Can't Pay

How To Deal With Creditors When You Can’t Pay

If you are in a situation where you cannot pay your debt then you need to do the following things:

1. Review Your Budget To See Areas You Can Cut

You may have to contact your lenders but before you do this you need to review your budget first. This will help you to understand your situation and see areas where you can cut your expenses and you can use the savings to pay at least something to the lenders.

In reviewing your budget you need to know that there are things like accommodation, food, utilities, transportation, medical insurance, etc that are a priority. These essentials are more important than your debt repayments. These are non-negotiables.

Having said that there are still things you can do to reduce these expenses. Below is my take on things you can do to reduce expenses on essentials.

  • Food: On food you can for instance cut out eating out and instead prepare your own food. This will definitely reduce your expenses on food. If you are still employed you can start preparing your own work lunch at home.
  • Transportation: On this, you can save money but cutting out unnecessary travel like going to a zoo, etc.
  • Accommodation: If you are living in a big house maybe this is time to consider moving to a smaller house. And if by chance you own a house it could be the right time to sell your house and use the proceeds to sort out your debts.
  • Medical Insurance: This one is a bit difficult to play around with at it concerns life. However, there is no harm in talking with your insurance provider to see if anything can be done to reduce your premiums.

Since you are in a financial hole once you are done with the essentials you seriously need to cut out all the non-essentials. In my previous post, I dealt with these non-essentials in detail.

That post is, How To Stretch Your Money During the Coronavirus Epidemic. I urge you to visit this post to learn more about the non-essentials and how to sort them out.

How To Deal With Creditors When You Can't Pay

I can however point out here that those non-essentials include things like cable tv, gym membership, non-essential clothes, eating out, going out to the cinema, etc.

All these are things that you can do without in your difficult situation.

2. Contact Your Lender For A New Payment Plan

Once you have reviewed your budget you need to contact your lenders as a matter of urgency. You need to explain to them clearly your situation and suggest that they pause your account or suggest a lower amount you can afford to pay.

Most lenders will be understanding of your situation but if they don’t then at least you can later tell a court or tribunal of your efforts.

Below are some tips for handling your lenders that can help you get a fair deal.

  • Be Proactive: Try to contact your lenders as soon as possible. Don’t wait for them to call you first. As already pointed out doing so will be a plus for you if you eventually go before a court or tribunal.
  • Be firm: Most lenders will try as much as possible to squeeze as much money as possible from you. You, therefore, need to stand your ground if doing so will affect you adversely.
  • Keep Your Promises: If you agree on something with your lender stick by that promise unless your situation changes. In the case where things turn for the worse then you can contact them again and agree on a new plan. Lenders cannot force you to pay what you don’t have.
  • Keep Copies of Correspondences: If you send any letter to your lender make sure that you keep a copy. You might need this as evidence later on. If a lender sends you a letter, keep a copy of that too.
  • Recorded delivery: If you send a letter to the lenders make sure you send them by recorded delivery. This is because you can then have evidence of delivery. You may need this in the future.
  • Keep a record of calls: If you receive a call from a creditor you need to keep the name of the caller, the date, and time.

Priority and Non-Priority Debts

When dealing with creditors one needs to be aware of what are priority debts and non-priority debts. Your focus should be on these priority debts

What are Priority Debts?

Priority debts are those where your failure to pay can have very serious consequences.

Examples of Priority Debts include:

  • Court Fines: This one is serious as it can land you in jail. You, therefore, need to do what you can to make sure that it is paid as soon as possible.
  • Heating and Electricity: Failure to pay heating and electricity debts can lead to disconnection. This is as serious as it gets. Therefore you need to prioritize it.
  • Mortgage: If you fail to pay your mortgage you can end up with your property being repossessed.
  • Rent: While in some places are protected in most areas you can be evicted for not paying your rent. So when it comes to debts related to renting, you need to seriously find a way out.
  • Secured debts: If a debt is secured it means that the lender can easily apply to the court to have the asset that secured the debt confiscated. You, therefore, need to be aware of that when dealing with these lenders.

What are non priority debts?

Non-priority debts are debts whose consequences for non-payment are less serious. The lender can go to court and this can lead to bailiffs visiting you.

These non priority debts include:

  • Credit card debts: These are what are called non-secured debts for which the lenders are taking a huge risk as they can lose all their money. They can still go to court but the consequences are less serious.
  • Payday Loans: These too are non-secured. That is why the lenders charge high-interest rates as they are dealing with people with poor credit ratings.
  • Overdrafts: Overdrafts are also not secured and therefore do not carry the same weight as the priority debts above.
  • Personal Loans
  • Bank and Building Society Loans: Bank loans too are not secured and depend on credit rating.
  • Store card debts: These too are also not secured and should be considered non-priority loans.

Here is a link to debt free quotes for your encouragement and pleasure.


I hope you have learned one thing or two about how to deal with creditors when you can’t pay. Nonpayment of debts can lead to serious consequences including loss of property. It is therefore important that you utilize the tips presented in this article.