Tips For Getting Through Unplanned Debt

I can’t remember my parents ever talking about money matters with my siblings and me. I know for a fact my grandparents never openly discussed such things. However, I see it becoming more common place for families to open up about financial matters around the dinner table, and I think it’s great.

When everyone is involved, it helps them understand why certain things are, or are not, possible. Better yet, keeping the lines of communication flowing is the best thing for any relationship, regardless of the topic.

Where I see the most financial trouble is one due to a life altering event. Whether due to a medical issue, accident, disability, or career change, an unplanned loss, or significant decrease, in income can become quite debilitating even for the closest of families.

And while many may wait and see how things pan out, taking swift action in regards to your finances is your best option.

Most institutions are willing to work with you if you’re upfront with them, are current on your payments, and don’t consistently make your payments late. Let’s take a look at a few:

• Credit cards may arrange for you to make a double payment the next month, while waiving any late fees.

• Postponing a mortgage/rent payment is not typical for a financial institution or landlord, and late fees are frequently not waived. Asking never hurts though… If delaying payment isn’t an option, you can possibly offset this by making a call to your various utility companies. Often times they have lower late payment fees than most of your creditors, or may allow you to make a partial payment without disconnecting services or charging a fee.

• A frequently overlooked debt is taxes, especially when you’re receiving unemployment benefits. Make sure to either have taxes taken out of your unemployment check, or stash enough back to cover what you anticipate you may end up owing. IRS penalties are brutal, and while your electric company doesn’t have the authority to garnish your wages, the IRS can levy a tax lien against you.

• If medical expenses are your problem, taking a distribution from your Traditional IRA may be an option, as long as the unreimbursed medical expenses are over 10% of your adjusted gross income, and occurs in the same year as the actual medical expense. But note, this just gets you out of the early withdrawal penalty, not the taxes owed on the distribution. Since these funds went in pre-taxed, they’ll be coming out taxed…

• Still unable to meet your obligations? As a last measure, if you participate in a 401k through your employer you may be able to take a loan. Ask your account administrator (usually the Human Resource Department) about your options.

Making contact with your creditors and explaining your situation as soon as possible is always a good idea. In most of these cases, asking for forgiveness instead of permission will only get you further behind, and further in debt.

Photo by Stuart Miles. Published on 02 June 2014
Stock photo - Image ID: 100263883