Would You Ever NOT Pay Your Bills on Purpose?

I Can't Pay My Bills**Welcome FMF Readers!** Please vote for me in Game 16 of Free Money Finance’s March Madness Tournament (just leave the word “degree” in the comments, please)  :)

I’ve been reading a lot about the looming student loan crisis lately. Apparently, Americans have more than 1 TRILLION dollars worth of outstanding student loans! Student loan debt now outranks credit card debt and auto loan debt for the average consumer and comes in second only to mortgage and rent payments.

With all of this debt and the abysmal state of our economy, it’s unfortunately not a surprise that people are beginning to default on their student loans. Worse, some people are simply deciding not to pay their student loan bills (as well as others such as credit card and personal loan payments).

Not Pay Your Bills….On Purpose?

After reading this, I began to wonder if there’s ever a time where I’d not pay my bills on purpose. Luckily, I’ve always had my head on straight when it comes to paying my bills on time. Sure, I’ve made some technical errors and scheduled payments for the wrong dates and I’ve had things get lost in the mail before, but I’ve always been able to have any late fee removed from my account(s) because I have a solid payment history.

This wouldn’t be the case had I skipped payments or missed them on purpose. After all, bad financial behavior is usually rewarded with negative consequence such as fees, credit score reductions and an inability to finance the things you want to buy at a low interest rate.

But what about if you find yourself in dire straits when it comes to your finances? What if you’ve experienced an accident or illness and have no savings or insurance? What if the reality is that you just have no money? Then what?

Not Being Able to Pay Your Bills

Most people who find themselves in this serious of a situation tend to throw in the towel and/or bury their heads in the sand. When things are so bad that you don’t know where the next dollar is coming from, it’s understandable that you’d want to deny the situation. When it comes to finances (as with most things), the problem with denial is that is just makes the situation worse!

If you truly cannot pay your bills, there are options out there. First and foremost, you have to realize that these are not good options in terms of their consequences and this is not a recipe for how to be a financial deadbeat–these are the choices you can make when in a desperate situation that can help you eventually dig yourself out of whatever mess you’re in—but only if you commit to working hard!

Realize Not All Debts are Created Equal

Do you have secured debt or unsecured debt? Perhaps both? Each of these types of debts need different approaches to dealing with them if you’re having a hard time paying your bills. Because secured debt is often tied to some type of collateral (your house, your car, etc), those are the bills you should try to pay first. For unsecured debts such as credit cards and medical payments, the lender/organization must first sue you before they can take any actions such as wage garnishment, etc. This essentially buys you more time to figure out your situation.

Again–note that this is a method to be employed during desperate situations only! When you begin to skip payments, your credit score will tank, the late fees will stack up and you’ll be facing a bigger hurdle to clear.

There is Relief

Debts such as mortgages and student loans may qualify for government assistance. If you can’t pay your bills, consider applying for a financial hardship or forbearance. While it’s not a permanent solution and you will still have to pay those loans back, the process can allow you time to get your financial house in order before the next payments are due.

Just remember that mortgage lenders can foreclose on you in as little as three months–ensure you’re doing your best to get back on track with payments ASAP!

Communication is Key

No matter what your situation, if you’re having a hard time keeping up with your bills, COMMUNICATE. Call your lenders, ask if there are any special programs, have them note on your account that your next bill will be a bit late. The more you communicate in an open, honest way, the better your chances of getting some help during this difficult time.

The Bottom Line

All of these options are temporary, short-term solutions to get yourself out of a bind–they are not part of a sound financial management plan. You can’t live and behave this way forever, so make sure you’re doing everything in your power to cut expenses, bring in more money and seek help where possible.

Would you ever not pay your bills on purpose?

 

Photo credit: xJason.Rogersx

 

 

 

The Happy Homeowner

The Happy Homeowner

We're a team of freelancers who are on a mission to inspire others to live a healthy, balanced life one cent at a time. Work from The Happy Homeowner has been featured on CNN Money, Yahoo! Finance, Wisebread, Lifehacker, The Dr. Oz Show, Good Housekeeping Magazine and many other outlets.
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39 thoughts on “Would You Ever NOT Pay Your Bills on Purpose?

  • February 25, 2013 at 9:40 am
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    I can't see myself not paying my bills on time. The only late payment I've ever had was a mortgage payment. That was because the mortgage company returned my check after their mail processing equipment sliced a big hunk off of it. Ironically enough, they refused to take it off my credit report since it was "My responsibility" to make sure they received the payment on time. That was years ago and I no longer hold a mortgage with them and never will! I imagine that if I lost my job and exhausted all my funds that would have to consider not paying some bills, I hope I never reach that point.
    My recent post Estate Planning – Our Return From Miami

    Reply
    • March 3, 2013 at 10:31 pm
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      That's a crazy story! Glad to hear you're not dealing with them anymore. I'm the same way about not being able to see myself not paying–but I suppose there's always a chance of really crazy things happening!

      Reply
  • February 25, 2013 at 10:05 am
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    I would let unsecured debts fall first and foremost. The are unsecured and not tied to anything, so that would have to be it. I have only missed a few payments, but that was due to technical issues. I always try my hardest to pay all of my bills on time, every time.
    My recent post Budget Fail: Unrealistic Expectations While Shopping

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    • February 25, 2013 at 1:47 pm
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      If it had to be that way, that's a good course of action–the last thing you need to do is to add homelessness on top of the entire mess!! Good for you that you work so hard to pay your bills on time

      Reply
  • February 25, 2013 at 10:24 am
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    I can't imagine not ever paying my bills. It just seems like a bad credit score waiting to happen.
    My recent post I Have a Confession

    Reply
  • February 25, 2013 at 11:39 am
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    No. Too much is at stake for me. Tax refund offset, wage garnishment. I would never default on my student loans. I will say that what I'm doing right now is essentially what WOULD have been default a decade ago before IBR. But I'm lucky that IBR exists so I can pay nothing without defaulting. I just don't have a job or any money right now.
    My recent post Running out of places to apply.

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    • February 25, 2013 at 1:49 pm
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      That's good that you recognize how much is at stake! I hope IBR works out well for you

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  • February 25, 2013 at 11:46 am
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    Defaulting on a (government) student loan is always a bad idea – it's pretty tough to outrun the government. Not only will your credit rating get hit but the government can garnish your wages,take your tax refund or SS payments without a court order if you default.

    Reply
    • February 25, 2013 at 1:50 pm
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      Absolutely! If you're already having a hard time making ends meet, I couldn't imagine the damage a wage garnishment could cause….and the unnecessary stress as well!

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  • February 25, 2013 at 12:08 pm
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    No. I choose to take responsibility for any debts that I take on. I feel sorry for people with overwhelming debt, but I also feel that it is their responsibility to pay it off. People shouldn't expect to be bailed out all the time.

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    • February 25, 2013 at 1:53 pm
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      AMEN! I'm really happy you shared this–I was hoping someone would pipe in about how important it is to take responsibility for your actions. The expectation of bailouts is too much!

      Reply
  • February 25, 2013 at 12:40 pm
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    I've been late but never not paid, I would have a coronary and die I think. I know a lady who just stopped paying her student loans, totally defaulted on them. She's paid under the table for her work, when she chooses to, and everything she has (car/house) was property of her husband before they married, her name isn't connected to anything, this is how she justifies it…she's an irresponsible ass.

    Reply
    • February 25, 2013 at 1:54 pm
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      O….m…..g…..that's horrendous!! I really can't imagine living that way…

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  • February 25, 2013 at 12:50 pm
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    In the past, when I was up to my eyeballs in debt I would not pay my bills and always paid as a result. Now, I could not imagine doing something like that. At the very least, I would call the company and explain the situation and see what could be worked out. That'll get you much farther than simply ignoring the situation. Like you said, communication is key and without it you give up a lot of your ground. Good post!

    Reply
    • February 25, 2013 at 1:58 pm
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      That's so good that you've changed your situation around so well! Kudos to you for learning so much and working so hard to change your financial opportunities.

      Reply
  • February 25, 2013 at 2:57 pm
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    I don't think I would unless we were in really bad situation! The job market is so shaky right now that we often see younger people getting a degree (especially master's) and then not being able to get a good job because they either don't have enough experience or sometimes just overqualified. And that's scary when you have a lot of debt after finishing graduate school!
    My recent post Coconut cinnamon rolls

    Reply
    • February 25, 2013 at 4:38 pm
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      I know what you mean–living in a city like Boston where there's such a focus on higher education gives me a lot of exposure to people who are going to grad school just because they can't find a job….you have to wonder what they'll do when it's time to pay those loans!!

      Reply
  • February 25, 2013 at 3:43 pm
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    I will stop paying my bills on purpose if the company owes me money or has charged a fee I think is unfair, until they put the accounts right. I will also stop paying if the damage to my credit is smaller than stopping to pay other bills. Although rent will always come first if I have rent / mortgage, so I can sleep kind of well at night!

    Reply
    • February 25, 2013 at 4:39 pm
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      Yes, having a place to sleep is paramount! There's no need to become homeless when you're in dire straits…there's always a creative solution–it just might mean a ton of hard work and sacrifice

      Reply
  • February 25, 2013 at 5:14 pm
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    No, I wouldn't stop paying, even when my student loans are probably fraudulent, predatory and usurious. My school had me believing I was taking out federal loans when they were actually private loans. Sallie Mae expects me to pay over 235% of what I originally borrowed. I'm doing everything I can to avoid paying that much in interest but how much is too much profit? I'm not in complete dire straights but I hope bankruptcy protections are restored for student loans soon so that those who are will be able to start over.

    Reply
    • February 26, 2013 at 9:01 am
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      I'm so sorry to hear about the position you're in–do you have any options through some of the repayment protection plans, etc even though they are private loans? I wish you all the best!!

      Reply
      • February 27, 2013 at 7:34 am
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        Private loans have no repayment plans like federal loans do. Not sure how it is with other lenders but once upon a time prior to 2012, you had a maximum of two years forbearance ($50 each loan for 3 months) with Sallie Mae. Now you only have one year MAX during your entire 10-25 year repayment to have a hardship…then you're screwed or forced to default. Sallie Mae makes more if you default, so why not make it harder for borrowers? Student loans are currently risk free to lenders, no consumer protections on student loans. That's why they're predatory. And that's probably one of the reasons why college tuition keeps increasing…(because the loans are risk free, lenders can lend higher and higher amounts knowing they will be paid one way or another).
        My recent post Lethargy

        Reply
        • February 27, 2013 at 8:26 am
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          Yeah, I remember reading/hearing something about the forbearance option, but I didn't realize it had been shortened to one year–that's craziness!!!

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          • February 27, 2013 at 11:23 am
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            It hasn't effected me yet but I had friends who thought they had months left and then all of a sudden Sallie Mae said they couldn't have any more forbearances. How do you pay when you dont have/can't find a job? A couple friends were forced into defaulting, sadly. Oh and Sallie Mae sent no notice of their changes and when I called to confirm the changes they said they did not have to notify borrowers of the changes in terms. It's ridiculous!
            My recent post Lethargy

          • February 27, 2013 at 11:25 am
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            I also know a couple people who had federal loans who were forced into default when their loans were sold to new lenders and they got no notification from either the former or the new. The whole system is messed up. :(
            My recent post Lethargy

    • February 26, 2013 at 10:29 pm
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      Can you prove the school misled you? That could be actionable. If you have paperwork, correspondence, or anything that indicates you were led to believe you were applying for federal loans, you might want to have a chat with the state attorney general in the state where the school is located, and also with the federal AG. If it's true and you can prove it, that could get you out from under the loans.
      My recent post When Rich People Get STUFF…

      Reply
  • February 25, 2013 at 5:16 pm
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    When I had a year without income in the late 90's I made a decision to hold off on overdue debt. My credit was already screwed and I was struggling to get back on my feet. By stopping payments so I could get a cash reserve and then making up back payments, I actually was able to pull myself out of the hole. It was a real struggle and not something I'd recommend without knowing ahead of time the pain you're going to cause yourself…..
    My recent post Zillow’s Top 10 Cities To Find True Love – 2 Guys and Your Money 029

    Reply
    • February 26, 2013 at 9:02 am
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      Thanks for sharing this! It's incredible what a change you've made–and all with your own hard work. You've got something to be quite proud of :)

      Reply
  • February 25, 2013 at 9:34 pm
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    Students need to realize that in most cases you cannot just stop paying student loan debt. If you stop paying, the interest will keep compounding. In most cases you can't discharge it in bankruptcy and your paycheck can be garnished.
    Anyone taking out a student loan should be required to take a test and pass in person, not the stupid online one that you can take multiple times until you pass.

    Reply
    • February 26, 2013 at 9:03 am
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      I agree! An in-person test (like a financial aid interview or the like) would be much more effective for teaching people about how student loans really work. Great idea!

      Reply
  • February 26, 2013 at 1:13 pm
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    I can't imagine a scenario where I wouldn't pay my debts. I would literally do anything I had to do before I let that happen.

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    • February 26, 2013 at 8:31 pm
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      Good for you! I like that train of thinking–it's exactly where I am right now, too

      Reply
  • February 26, 2013 at 3:33 pm
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    I didn't pay my CC bills on purpose 12 years ago because I had no money. Ended up consolidating them and paying them off but it REALLY screwed up my credit and kept me from buying a home for a really long time.

    Is that a picture of Michael Jackson?? LOL
    My recent post Car Repair: How to Avoid Getting Ripped Off

    Reply
    • February 26, 2013 at 8:32 pm
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      Yikes! I'm sure you've had quite the learning experience from all of that! Glad to hear they're all paid off…

      Definitely not MJ but your question made me laugh :)

      Reply
  • February 26, 2013 at 10:25 pm
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    Not being able to pay your bills is different from not paying your bills on purpose. I think most people who get into a position of truly not being able to pay bills do so because of some catastrophe, not out of choice — sickness, injury, job loss, loss of a spouse through death or divorce.

    Food and care for children have to come first. If that's all you can cover, then about all you can do is let the other bills go by the wayside. In that predicament, I'd probably try to keep paying the mortgage or rent, by way of keeping a roof overhead. Deals can be made with utility companies. But credit card bills and other debt whose nonpayment would not land me in the street? They'd go by the wayside.
    My recent post When Rich People Get STUFF…

    Reply
    • February 27, 2013 at 8:28 am
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      I like that you mentioned this! It's true that there are two courses of choice here–truly not being able to and then simply shirking responsibility. I was hoping to raise the thought of both but focus on some hypothetical scenarios in case anyone made the argument of the situation being out of your control (i.e. illness, etc). Regardless of how you get there, you at some point make a conscious decision to not pay the bills–whether it be temporarily or permanently.

      Reply

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