There are points in life when you may face an unexpected expense, a job loss or another type of emergency, and when these issues arise, the price tag can be quite high. That can place a heavy burden on your budget, especially if you’re already having a tough time making ends meet. And, right now, about half of Americans say they’re living paycheck to paycheck, according to a recent Bank of America survey, so there are a lot of people who simply can’t afford to pay for surprise expenses while managing their regular bills.

If your finances are stretched too thin, it can be easy to fall behind on what you owe, especially if you’re trying to pay off high-rate credit card debt. When this happens, the constant calls from creditors, the mounting late fees and the growing balances can make it tempting to ignore the situation altogether. But avoiding your creditors is usually the worst possible response, as it can lead to legal action, damaged credit and even more financial hardship.

The good news is that most creditors would rather work with you than against you if you’re struggling to pay off what you owe. They understand that there are circumstances that can impact anyone’s ability to pay — and that finding a solution benefits both parties. But how exactly should you deal with your creditors when you can’t afford to pay back what you owe?

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3 smart ways to deal with creditors when you can’t pay

The following strategies could make it easier to deal with your creditors if you’re behind on your debt payments:

Try to negotiate a reduced balance

If you’re in severe financial distress, your creditors may be open to negotiating a reduced balance on the account. Most creditors often prefer to accept a partial payment rather than risk receiving nothing at all. This approach is especially effective with unsecured debts, such as credit cards or personal loans. 

Start the negotiation by explaining your financial hardship and proposing a lump-sum payment for less than the total balance. For example, you might offer to pay 40% to 50% of the balance upfront, with the remaining portion being written off by the credit card issuer. If you’re unable to make a lump-sum payment, you can also ask about monthly payment plans for the reduced amount.

Just make sure to get any agreement in writing before making a payment. Written documentation protects you from future disputes or collection efforts, so you don’t want to skip that step.

Find out how the right debt relief options could benefit you now.

Ask them for help

While asking for help from your creditors may seem counterintuitive, it can be a smart way to approach your debt. Many creditors offer hardship programs to assist customers experiencing temporary financial setbacks. These programs are designed to make payments more manageable while helping you avoid default. 

The availability of these programs varies by creditor, but many are willing to provide temporary relief in some form to help you get back on track. If you enroll in this type of program, you may be offered relief via: 

• Temporary payment deferrals: The creditor may pause your payments for a few months to give you time to recover.
• Lower interest rates: Your creditors may also agree to reduce your interest rates, which lowers your monthly payment and the total cost of your debt over time.
• Waived fees: Some creditors will eliminate late fees or penalties to ease your financial burden.
• Adjusted minimum payments: Some creditors will offer temporary relief in the form of smaller payments during a set period.

Utilize one of your debt relief options

If your financial challenges are more than temporary, you might need to explore professional debt relief solutions. The following options can help you restructure or reduce your debts, depending on your needs and goals:

Debt consolidation

Consolidating multiple debts into a single loan can simplify your payments and potentially lower your interest rate. This option tends to work best if you have good credit and steady income, but some debt relief companies will also offer debt consolidation programs that have more flexible requirements. Benefits of this option include:

• One monthly payment instead of many
• Potentially lower interest rates
• Fixed repayment timeline
• Simplified debt management

Debt management

Working with a credit counseling agency on a debt management plan. With this option, the counseling agency works with your creditors to lower interest rates, reduce fees and roll your debts into a single, affordable monthly payment. You’ll then make one payment to the agency, which distributes it to your creditors. Benefits of this option include:

• Reduced interest rates
• Waived fees
• Structured repayment plan
• Single monthly payment to the counseling agency
• Professional negotiation with creditors

Debt forgiveness

If you’re unable to pay your debts in full, a debt relief company can negotiate with creditors on a debt forgiveness plan where they accept a reduced payoff amount. While there’s no guarantee that your debt will be settled, this option often results in paying 30% to 50% less than what you currently owe. The remaining portion of your balance is then “forgiven” by the creditor.

The bottom line

Dealing with creditors often requires patience and persistence and a little knowledge on your part. By approaching your creditors professionally and armed with an understanding of your options, you’re more likely to find constructive solutions that help you manage your debt effectively while protecting your long-term financial interests. The key is to act quickly, communicate clearly and stay committed to resolving the situation through whatever means work best for your circumstances.