You have something in common with the people to whom you owe money: you both want the bill to go away. Your creditor wants to be paid, of course, and if you had the money you would pay it – right?
Raewyn Fox, CEO of the New Zealand Federation of Family Budgeting Services thinks so.
“We don’t get many clients who just choose not to pay their bills,” Fox says. “Most of our clients are aware that they owe money and would love to get rid of those debts. Ideally that would be by paying them, but realistically some people have overcommitted and just can’t afford to pay everyone back. It might be a temporary situation – you just need more time – or it might be a larger problem.”
If you find yourself unable to pay a bill, here are some ways to handle it:
Give it some attention
“The very first thing to do is to look at your bill,” Fox says. “Too many of our clients come to us with unopened mail from their creditors – they’re too scared to open the envelope. But you need to know what you’re dealing with, so: take a deep breath, stay calm, and open the bill.”
One of the best things you can do, Fox says, is communicate with your creditor. “Talk to them sooner, rather than later, and let them know what’s up. A pleasant phone call now explaining your situation might prevent a nasty phone call later when the debt has progressed.”
“It’s unlikely a creditor will hold this against you. A quick call to say ‘Look, I’m just not going to be able to make a payment this week’ will go down a lot better than the creditor chasing up a missed payment,” Fox says. “Stay polite, don’t over promise, and stick to the subject.”
Explore hardship provisions
Financial service providers are required to have hardship provisions. These are designed for people who come into an unexpected hardship, although the implementation varies. “Creditors determine their own processes around hardship,” Fox says, “and this means they go about it in different ways.”
“Your contract will explain some of the hardship provisions, although sometimes it can be hard to
understand the legalese. So when you talk with your creditor, ask them about their hardship provisions and see where it leads. It might be worth applying for a payment holiday under their hardship provisions – just be clear on what that means to the interest and term of your loan.”
Keep it realistic
“If you’ve got $500 coming in next week, it’s pointless to promise three different creditors $300 each,” Fox says. “We often have people coming to us because they’ve promised debt repayments they just can’t manage. When talking with your creditor, be careful not to promise too much. Write a budget to determine exactly what you can afford, and offer to send them a copy to prove what you say,” Fox suggests.
You and your creditor both want the bill paid, Fox says. “Working together with your creditor – in a positive and realistic way – is likely to have the best outcomes for both parties.”
Budgeting advice is offered free through the New Zealand Federation of Family Budgeting Services, with over 160 locations throughout the country. You can find your nearest budgeting service by visiting www.familybudgeting.org.nz or calling 0508 BUDGETLINE (283 438).