What to do if you can't pay a bill

Rank by consequence, not by who is calling loudest. The creditors who call most are usually unsecured, and unsecured debt has the least severe consequences.

First tier — anything where you lose the asset or the home. Rent or mortgage, property taxes, utilities you need to stay housed, and car payments if you need the car to work. Missing these leads to eviction, foreclosure or repossession, and those are outcomes you cannot undo by catching up later.

Second tier — anything with a compounding legal consequence. Child support, which has enforcement mechanisms far beyond ordinary debt including license suspension and wage garnishment. Federal taxes, where the IRS has collection powers no private creditor has. Insurance premiums, where lapsing coverage exposes you to catastrophic risk and re-underwriting.

Third tier — unsecured debt. Credit cards, personal loans, medical bills, store accounts. These damage your credit and can end in a lawsuit and garnishment, but they take time and they do not immediately cost you housing or transport.

Medical bills belong low in the ordering for a specific reason: they have the weakest consequences of any common debt. The major credit bureaus no longer report paid medical collections, medical collections under $500, or unpaid ones less than a year old, and hospitals have charity care obligations that other creditors do not.

Never borrow against tier one to pay tier three. Taking a payday loan or a car title loan to pay a credit card converts a manageable problem into a much worse one — title loans in particular risk the vehicle at interest rates that are among the highest legal rates in the country.

Call before the due date. Every category of American creditor has something available — forbearance, deferment, a payment plan, a hardship program, a reduced payment period — and the version offered to someone who calls before missing a payment is consistently better than what is offered after.

Say the word 'hardship'. It routes you to a different queue with different authority from ordinary customer service.

For mortgages, ask about forbearance and loan modification, and contact a HUD-approved housing counselor, which is free. Federally backed mortgages have specific loss mitigation requirements servicers must follow, and servicers generally cannot start foreclosure until the loan is significantly delinquent.

For utilities, ask about a deferred payment arrangement, budget billing and any winter or medical shutoff protection. These are regulated by your state public utility commission, and most cold-climate states have winter moratoria for heating utilities.

For credit cards, ask about a hardship plan — a reduced interest rate and fixed payment for a period. Issuers have them and do not advertise them.

For federal student loans, income-driven repayment can reduce payments substantially and deferment or forbearance exist for hardship. Never pay a company for help with federal student loans; everything they offer is free through your servicer or studentaid.gov.

For the IRS, file the return even if you cannot pay — the failure-to-file penalty is roughly ten times the failure-to-pay penalty. Online payment plans are approved in minutes for most balances, and the failure-to-pay penalty is halved while an installment agreement is active.

Get every agreement in writing before making a payment under it, and keep the reference number and the name of the person you spoke to.

Dial 211. It is the community services line covering most of the country and connects you to local programs for rent, utilities, food, medical costs and crisis support — many of which have no other discoverable front door.

LIHEAP pays energy bills and crisis assistance for eligible households. It is federally funded, state-run, and chronically under-claimed. Its companion weatherization program pays for insulation and efficiency work outright.

Emergency rental assistance programs operate through many states, counties and cities, and eligibility is frequently broader than people assume.

For medical bills: nonprofit hospitals must maintain and publicize a financial assistance policy as a condition of tax exemption, and thresholds often extend well above the poverty line. Ask for it by name — hospitals are not required to volunteer it. Ask for the cash or self-pay price too, and never put medical debt on a credit card, which converts a flexible low-consequence debt into an expensive one.

Check Medicaid eligibility, which has no enrollment window and is based on current income in most states, and the ACA Marketplace, where a fall in income can substantially increase subsidies mid-year.

SNAP for food, WIC for pregnant women and young children, and school meal programs all have eligibility that is broader than commonly believed, and applying is free.

Free nonprofit credit counseling is available through National Foundation for Credit Counseling member agencies. They can set up a debt management plan with reduced interest, and the counseling itself is free. Avoid for-profit 'debt settlement' companies, which charge substantial fees, tell you to stop paying creditors, and frequently leave people worse off with damaged credit and lawsuits.

You have rights under the Fair Debt Collection Practices Act, and they are more useful than most people realize.

Within 30 days of a collector's first contact, send a written request for validation of the debt. They must stop collection until they verify it in writing. A meaningful share of collection accounts cannot be validated — debts get sold repeatedly and documentation is frequently lost.

Send it by certified mail and keep the receipt. Verbal requests do not carry the same weight.

You can require a collector to stop contacting you entirely, in writing. That does not extinguish the debt and they can still sue, but it stops the calls.

Collectors cannot call before 8am or after 9pm, cannot call you at work after being told not to, cannot threaten arrest or actions they cannot legally take, and cannot discuss the debt with third parties. Violations are actionable and the CFPB takes complaints.

Check the statute of limitations for your state and debt type. A time-barred debt can still be collected on but cannot be successfully sued on — and crucially, making a payment or acknowledging the debt in writing can restart the clock in many states. Do not pay anything on an old debt without checking this first.

If you are sued, respond. A default judgment because you ignored the papers is the most common way a modest debt becomes wage garnishment, and it is entirely avoidable. Legal aid through LawHelp.org is free for those who qualify.

File a complaint with the CFPB about any creditor, servicer, collector or credit bureau — companies must respond, usually within 15 days, and it is free and effective.