Q: For the first time in 22 years I can’t make my mortgage payment. It will get paid via a little help from the mortgage company but I am very concerned. I am living in the red by about $400 each month.
When do I say enough is enough and stop paying certain creditors to pay other debts? I have credit scores from 730 to 760.
A: I’m sorry to hear that you are in a financial bind. But you’ve definitely taken the first step to turn things around financially, which is to recognize that you do indeed have a big problem.
Maybe you were in denial in the past, or maybe your economic fortunes simply changed recently for some reason. Whatever the case, you seem to acknowledge that things can’t go on the way they have been. Not with you living $400 in the red each month.
If you’ve had a home for 22 years without missing any payments, I would hate to see you lose your house, so I hope you’re not talking about skipping payments on the home. Probably not.
Since it sounds like you’ve reached out to your mortgage lender and received at least some support. I assume you are considering not paying other creditors, like credit card companies or perhaps your auto lender, that kind of thing.
I would suggest you take two steps. The first is to do an honest assessment and overhaul of your budget. Even if you get some relief from your creditors, it won’t do you any long term good if you are deficit spending.
Go over your spending with a fine-tooth comb and see where you can cut back. Surely there are some areas/expenses you are willing to sacrifice or slash in order to keep your home, maintain your very good credit rating, and have financial peace of mind. Read this post about how to create a proper budget and this article on overhauling your budget too.
Additionally, before you simply stop paying creditors, contact each one directly and see what options, if any, might exist. Perhaps some of them are willing to put you on a deferred payment plan.
You suggested in your email that a six-month reprieve from certain payments would give you some breathing room. Tell that to your creditors. If you make small token payments, that may show a “good faith” effort on your part, and it may keep bill collectors and creditors from hounding you.
But those partial payments won’t necessarily stop creditors from reporting you to the credit bureaus. Anytime a debt is not paid as originally agreed, the creditor has the legal right to report that information to the major credit reporting agencies: Equifax, Experian and TransUnion.
If your creditors won’t offer any relief, and there’s nothing else in your budget to cut, yet you find yourself still in the red, then yes, it’s time to “cry Uncle.” At that point, I would make strategic decisions about what bills get paid first and which are second and third-tier obligations.