When I Can’t Pay My Bills – 9 Crucial Steps You Can Take

Written by Jeff Campbell in Budgeting Last Updated January 19, 2024

There’s nothing worse than having a pile of bills and notices from collection companies and just not having enough money to pay them. Wondering what to do when I can’t pay my bills?

If you can’t pay your bills, start by cutting all unnecessary expenses, prioritize bills from most to least important, delaying or reducing payments to the least important, negotiate with debt companies, add a side hustle to boost income, and do a monthly budget.

When we can’t pay our bills, we feel ashamed and feel like we are failing. If we have a spouse and/or kids we feel like a failure to them too.

However, I’m here to tell you that almost everyone considered “successful” today has, in fact, felt that way too at some point in their lives.

The #1 financial guru in the world is probably Dave Ramsey and guess what? At one time, before he was a household name, he filed for bankruptcy.

So today, we’re putting aside judgments and feeling sorry for ourselves and getting about the business of figuring out how to get our financial house in order and get our lives back on track.

Specifically, we’re looking at all the steps you need to take when you are saying “I can’t pay my bills!”

Co-authored with personal finance expert Brian Loman of ElcLoans

What happens if you never pay your bills?

Middle Class Dad can't pay my bills stressed money guy on phone

We’ve all struggled to get ahead.  Even the best of us have had points where we were behind on our bills and our bills exceeded our income.

Trust me.  I have had more than a few times when I said I can’t pay my bills!

When I can’t pay my bills I not only have the financial burden. I also have emotional turmoil.  It makes me feel like a failure.  I feel like I’m letting my family down. But I’m also stressed.  Bill collectors start calling.  Envelopes start showing up in the mail.  I start to panic.

Technically and legally though, when you’re at that place where you say I can’t pay my bills, a few things can happen.  Those include: 

  1. Damaging information can be put on your credit report – late payments and unpaid debt stay on your report for 7 years
  2. If you have a “secured” loan, that means you legally promised something as collateral against the debt.  The creditor can take possession of whatever that is (car, house, etc).
  3. If you got someone to co-sign a loan you are putting their credit report at risk too. So make sure to let them know

The key is to not procrastinate or hide your head in the sand.  You made this mess so it’s up to you to clean it up.  Get information, make a plan and take action.

I have a previous post about the best ways to Stop Living Paycheck to Paycheck (click to read my article).  Take a moment and review those steps as they can make a big difference!

Below, I get into some specifics about what happens when you can’t pay specific kinds of bills.

What happens if I can’t pay my medical bills?

I’ve been in this situation before.

Once upon a time, our health insurance situation was pretty decent. Not perfect, but certainly far better than it is today. While today many have some form of coverage where they didn’t before, it’s often what they call catastrophic coverage; meaning it only really covers a portion of really major expenses.

Our health insurance rates are also quadruple what they were a few years ago too. So we’re paying a whole lot more for a whole lot less.

BUT I digress.

I point all that out simply because it’s not uncommon for many of us to get huge medical bills after we or one of our kids has a medical procedure. My oldest daughter had a heart condition known as SVT. Summer before last she had a procedure done.

Even after insurance, our portion of the bill was about 20 grand!

I’m still paying that bill. I send them a small amount of money every month that fits into our budget. They cash the check and send me a new statement. We’ve been doing that over a year at this point.

I’ll have that paid off eventually (and I will pay it as a matter of principle).  But it will take a while.

However, we had another medical bill for my wife’s gall bladder emergency surgery (scary term considering it was done as an outpatient procedure) and I was paying that bill off and had paid it down by more than half.

For some odd reason, they refunded everything I had paid and sold it to a collection agency. Guess what bill suddenly got really low on the priority list?

But really, compared to most other kinds of debts, medical bills can go to the bottom of your priority list. They tend to harass the least, take legal action the least, and are more willing to negotiate. They are also much more willing to just take small monthly payments as I make.

What happens if I can’t pay my student loans back?

This is much more serious than medical bills, and as health insurance, our college tuition system in this country is a mess!

Never before have our kids paid so much for an education only to come out of college to get paid so little. I sure hope the future generations are a whole lot smarter about when and if to go to college, WHERE to go to college (people care IF you have a degree, not where you got it).

But if you don’t pay your student loans, here’s the timeline:

  • You are considered in default if you haven’t paid your loan(s) in 270 days
  • The payment is considered delinquent even if you paid something, so partial payments don’t really count
  • The loan will be considered delinquent until all past due balances are paid
  • You will get reported to the credit bureaus after 90 days of being delinquent
  • After 270 days it will get sold to a collection agency

Once your loan gets sold to a collection agency, here’s what happens next:

  • The entire loan balance is considered due in full
  • You lose access to any student loan forgiveness programs or payment plans
  • If you are still in school, you’ll lose financial aid
  • The collector can garnish your wages to collect the debt
  • They may place a lien against your house if you own it
  • They can take your tax refunds if you are eligible

In other words, not paying your student loans is a BIG deal; don’t do it. Get a 2nd job, sell some stuff, do whatever you need to do, to make it happen; even a personal loan (which is still debt, but not as bad if you default as a student loan).

If you’re in a situation where a personal loan is the last resort, the folks over at iCash Loans make it easy to get the best offers in under 2 minutes, without affecting your credit score!

What happens if I can’t pay my car payment?

Well, if it’s a really nice car, I’d consider selling it and getting a $1,000 beater while you get out of debt and clean up the mess.

Sometimes though, we’re what they call upside down on the car. That simply means you owe more than you could sell it for.

If you are just a little upside down, I’d consider taking out a small loan just to be done with it (make sure and get enough to also get that $1,000 car).

But if you’re really behind, that personal loan might not be an option.

Assuming this car is your means to get to work, it’s important from an income standpoint too. Unlike collection agencies, the bank or the company that you owe the money to can be a little more understanding.

So don’t hide your head in the sand.

Call them and let them know of your situation and how it’s affecting your ability to pay. Many times, they will give you a grace period, what they call forbearance, where you can skip your payment for a few months.

It won’t change what you owe and could add a little additional interest owed, but it gives you breathing room.

But if you stop paying and don’t talk to them, you can expect your car to get repossessed after about 90 days. You can still get it back after that happens, but that typically requires paying what’s owed, plus fees, within 2 weeks.

What happens if I can’t pay my taxes?

Like student loans, this is another type of debt you don’t want to hide your head in the sand over!

As they say, the only thing certain is death and taxes. Actually, that was Benjamin Franklin, but it still applies today.

First and foremost, continue to file tax returns!

The penalties for not doing anything are a whole lot worse than filing and not paying what you owe. When you file, if you can’t pay the full amount, still pay something.

The IRS has the ability to an extension on paying what you owe or allow you to make installment payments.

Here are my detailed guides on how to do both of those. Just click the links to my website to read the crucial steps you need to take.

How to File a Tax Extension

How to Set Up an IRS Payment Plan

But if you just don’t pay or file??

Well, it’s possible you could end up in jail. The IRS will have you jailed, not for making an honest mistake, or being broke, but for the following reasons:

  • Tax evasion
  • Not filing a tax return – 1 year jail time for each year you didn’t file
  • Assisting someone else evade taxes

Even if those don’t apply, the IRS can still garnish your wages, and they don’t have to get a court order to do it (which all other debt collectors do).

So DON’T try and hide from the IRS.

What happens if I can’t pay my credit card debt?

This is also one you can put fairly low on the priority list.

In most cases, yes, they will call you repeatedly, they’ll just sell your bad debt to a collection agency, and those folks will call and harass you and try and get you to pay.

The worst things that happen in most cases are:

  • Incurred late fees and penalties
  • Lowered credit score
  • Increased interest rates on all your credit cards
  • Possible legal action 

In many cases, though, unless you are in default of tens of thousands of dollars, most credit card companies would prefer to sell your debt to a debt collector than go through the hassle of suing you or getting a judgment for wage garnishment (but they can do those things).

But if you are struggling to put food on the table, or keep the lights on, just send these folks $25/month.

They won’t like it. They’ll call and harass you. But they can’t claim you are not paying or paying late, only not paying in full. So send them whatever you can each month, on time, until you get back on your feet.

What happens if I can’t pay my child support?

This is another serious one. Not only because of the legal consequences, but also because this is your child we are talking about, and nothing should come before your child.

Sadly, though, there are a LOT of people behind on paying child support. According to Congress, there are 11 million cases and $116 billion owed in back child support.

So what happens if you stop paying child support?

  • You may lose your driver’s license
  • The court may garnish your wages (up to 65%)
  • Any tax refunds will get confiscated
  • The court may place liens on any property you own (house, car, etc)
  • They will report you to the credit bureaus just like a creditor, so your credit score takes a nosedive. You’ll also have the stigma of not paying child support for anyone who looks at your credit report in the future
  • You could be jailed if a judge finds you in contempt of court
  • You could be charged with a felony if you owe $10k or more and have not made an attempt to pay

In short, like taxes, and student loans, make this one a TOP priority, for yourself AND your kid(s).

What happens if I can’t pay my utility bills?

Well, sitting in your house with the power shut off or no running water is no fun. My wife grew up that way and it’s not a good way to live.

First off, when times are tight, you have to prioritize your bills.

If you need to let a utility lapse, not getting trash or recycling pick up isn’t nearly as crucial as electricity or water. Cable and internet also aren’t crucial for our existence (no matter what your kids say).

You can also turn off the AC or at least adjust the thermostat. You can also turn the hot water heater down too.

There is also a government program to help you with paying utility bills.

The Low Income Home Energy Assistance Program (LIHEAP), is part of the Department of Health and Human Services. They can provide financial assistance both with bills, but also repairing broken equipment such as your HVAC system.

In addition, many utility companies themselves have financial assistance or payment programs, so when in doubt, call and ask what your options are.

But if you don’t pay, they will shut you off, often charging fees and penalties when you later request it to be turned back on.

Can you go to jail for not paying your bills?

The short answer is in most cases, no.

In the 1800s the so-called “Debtor’s prisons” were commonplace.  Back then, if you said to yourself I can’t pay my bills, there was a very real chance of ending up in jail.

Fast forward to today and there are really only 2 kinds of debt that can land you in jail in the US.  Those are a failure to pay taxes and failure to pay child support.

That being said, if a creditor does take you to court for bad debt and a judge issues an order to appear, you could be jailed if you fail to show up or otherwise don’t follow the judge’s orders.

How do I talk to a creditor if I can’t pay?

Creditors just want one thing; your money.

They don’t care about you, your situation, or how much you can actually afford to give them. No offense to creditors, but they tend to be bottom feeders; at least the collection agencies.

So right out of the gate, plan to communicate in writing only; that way there’s a paper trail. Ideally email, but old-fashioned snail-mail works too. If you just talk to them on the phone any promises they make to convince you to give them your bank account info could easily be forgotten.

NEVER GIVE A CREDITOR ELECTRONIC ACCESS TO YOUR BANK ACCOUNT

If you’re dealing with a collection agency, also realize they likely bought your debt for pennies on the dollar of what you actually owed. As a matter of integrity, I think it’s important to pay back what you borrow.

But, say you owed $1,000 and didn’t pay. Whoever you borrowed that from probably sold it to this collection agency for $250. If they can get you to pay anywhere near that $1,000 they make out like bandits.

Then, on top of that, they are probably telling you there are interest, penalties, and other fees. Maybe they even have the gall to ask for $2,000.

In truth, they’ll probably take $500. But you’ll have to be diligent, persistent, and unwavering.

I have a detailed guide to doing credit report repair yourself for free, and in that article, I walk through this process in much greater detail.

So click the link to see that now on my site, if it applies to your situation.

How long can a debt collector legally pursue old debt?

Every state in the US is a little different. But states have statutes of limitations on debt collection just like other offenses.

Generally speaking, an old debt is considered uncollectable after a period of only 4-6 years. That is different, however, from how long it stays on your credit report (typically 7 years).

Also know that if you occasionally make payments on it, you’re starting that 4-6 year cycle over again, so only do that IF you have the intention of paying it off in full.

Now, just because an old debt is past the statute of limitations in your state doesn’t mean that they will stop harassing you.

After all, after a few years, chances are your old debt has been sold to a few different companies and every time that happens, you might start getting contacted again.

But you also have rights under the Fair Debt Collection Practices Act (FDCPA). Those rights include:

  • They can’t call you before 8 am or after 9 pm
  • Debt collectors have to stop calling you at work if you ask them to
  • They can’t harass you by any means of communication
  • If you obtain an attorney and make them aware of it, they have to stop contacting you and can only speak with your attorney
  • You can send them, in writing, a request to stop contacting you (and they are obligated to only acknowledge that once and possibly indicate future actions they may take)
  • They are required to tell you the amount owed, who that was owed to, and that it can be disputed

How do I get out of debt with no money?

It’s like the chicken and the egg. Which came first.  How can you pay your bills and get out of debt when you don’t have much money to begin with?

That’s a question many of us who have said “I can’t pay my bills” have wrestled with.  The key is two things:

  1. You need to get on a written monthly budget 
  2. You need to examine both your income and your expenses

If your income is too low or your expenses too high, you’ll never succeed financially or otherwise.

Right out of the gate, we know the average American brings home around $50,000/year. So if your salary is significantly below that, we have an income problem.

So I don’t want you to feel bad about that or beat yourself up over it. But you do need a plan to fix it.

So ask yourself a few questions:

  • Is there room for advancement where I work now?
  • If yes, what do I need to do to take advantage of that?
  • No room for advancement? Are there other companies where you live that might pay better?
  • If no, are there training programs or skills you could learn that would change that?
  • Again, if the answer is no, I would look at possibly moving to a city with more opportunity

There is always an answer. Sometimes we just aren’t looking hard enough or asking the right questions.

If your income is OK, then you likely have an expense problem.

Getting on a written monthly budget will make that abundantly clear. But some of the most likely scenarios I see when people and families are living beyond their means include:

  • They bought too much house – Your total monthly house payment (rent or mortgage, including any taxes and insurance) should not be much more than 25% of your monthly take-home pay.
  • They drive expensive cars – A $50,000/year salary and that new Lexus just don’t add up. Drive what you can afford, ideally never buying a brand new car, and never leasing a car.
  • You go on vacation while deep in debt – If you owe a bunch of money, I’m sorry to report, that any lavish vacations should be on hold while you clean the mess up (especially if you charge that vacation on a credit card).

There are a lot of other ways you might be over-spending for your income, but those are typically the worst areas.  You have to get fired up about getting out of debt and cutting the financial stress out of your life.

That means hard work and sacrifice.

It might even mean selling your house and cars if they are way more than you can really afford (been there, done that). But the end result of being out of debt, not stressing or fighting about money will be SO worth it!

For a detailed plan of what to do when you’re Budgeting on a Low Income (click to read my article), take a moment and review my post on that to help get you started.

Want more help on getting out of debt?

Check out my free Get Out of Debt Checklist which walks you through the journey step by step.


So what are the . . . 

9 Crucial Steps I Follow When I Can’t Pay My Bills?

1) Cover Basic Needs First

When you’re struggling to the point of not being able to pay the bills, the first thing you need to do is take care of you and your family, not the bills themselves. That doesn’t mean ignore your bills, but it does mean ensuring there is food and basic necessities before you begin to tackle the issue.

Necessities obviously include rent, power, and water, but putting food on the table is more important than paying the cable bill.

This all comes down to prioritizing and realizing which stage you are it with each outstanding bill.

2) Prioritize Bills and Debts

If you simply do not have enough money to cover everything then you’re stuck with the difficult task of prioritizing bills and debts until you are back on your feet again.

You should take in to account how necessary each bill is for survival (as previously mentioned the cable bill can go somewhere near the bottom), but also what the repercussions are for failing to pay. This might depend on whether you have already missed payments.

For example, not paying the electricity bill may eventually lead to it being cut off. However, this is unlikely if it’s the first time you missed a payment.

You might also be in the realm of vehicle repossession (failing to pay car loan) or home repossession (failing to pay a mortgage).

List everything and determine what is absolutely necessary to pay this month.

3) Re-budget 

As well as prioritizing your bills it’s also important to reassess your income and budget accordingly, so you can begin to reduce the cash-flow problems that got you here in the first place.

There are a lot of ways you can cut expenses and divert money towards your outstanding bills; from downgrading or cutting your cable or cell phone plans, to buying generic and unbranded groceries and day-to-day items, to limiting your leisure activities that cost money, or walking and cycling to work.

A budget does not have to be complex. You just need a complete list of income and expenses, allowing you can calculate the difference and see where you can tighten your belt.

4) Negotiate 

Creditors can be surprisingly sympathetic if you start a dialogue and honestly explain the situation (though it’s best to do this before going into the red).

Many companies will have policies about extensions, repayment plans, lowering bills. Or they may be open to moving you on to different plans and fees (depending on the bill). So don’t be afraid to negotiate.

Ultimately they want to get paid and this is more likely to happen if they work with you instead of demanding the full amount right away with no wiggle-room.

The worst thing you can do if you can’t pay your bills is to ignore them indefinitely. This will almost always result in the service being cut and collection proceedings to recover what is owed.

If your credit ends up in bad shape, I highly recommend checking out my Credit Report Repair Steps (click to read my article on all the steps).

No need to pay anyone when you can do the same thing at no cost.

5) Use a Loan or Credit Card, but Wisely 

Using debt to cover debt is only an option for those who are disciplined and have already assessed their finances.  And it should be a last resort to ward off bankruptcy or foreclosure.

But if you have done the calculations and determined you’ll be able to repay a loan or credit card debt to cover your bills, then it could give you some much-needed breathing room.

If you can’t afford it, however, you might just make your long-term situation worse. 

6) Work Overtime or Get a Side Job

Although you’re not going to see the money instantly, one way to help get yourself back on your feet is to work overtime (if possible) or get a second job, do some online freelancing, or sell unwanted belongings.

This extra effort does not necessarily have to be permanent, but it’s always a good idea to get bills and debts paid as soon as possible, so if the option for added income is available you should certainly take it. 

If you don’t have time for a traditional side job, check out my article on all the ways to Earn Extra Cash.  Many of these can be done from home, including one that pays really well!

7) Conserve Energy

One simple money saver that many people overlook is reducing their energy.

Do you turn off all the lights when you leave the room? Do you leave your computer on overnight or leave other electronics and appliances plugged in?

Are you using energy-efficient bulbs (click to see the best deal on Amazon) and less intensive settings on the washing machine and dishwasher?

All of these can help you save on your energy bill in the subsequent months, to help you get back in control of your finances.

8) Don’t Go It Alone

If you are married or in a serious relationship it’s vital to make sure they are on the same page.  Money fights and money problems are often the top Reasons for Divorce.  So make sure you are totally open and honest with them.

If the 2 of you are united you’ll be that much stronger.  You are a team now instead of wasting time and energy fighting each other or hiding the mess from each other.

9) Don’t Get Too Stressed 

Finally, remember that as stressful and demoralizing as it can be to unable to struggle to pay the bills, it’s not the end of the world.

There are usually several steps that take several months before you start getting the power cut off, property repossessed, eviction notices, and other dire situations. Stress has a way of slowing our progress. It will slow you down in your journey out of this mess.

If this is the first time you’re late with bills, take a deep breath, follow some of the above tips, and take back control!

Final Thoughts

In this post, we looked at the situation we’ve all found ourselves in at one time or another. When the bills outnumber the cash and we aren’t sure how to dig our way out!

We looked at how we got there, key places to cut back and talked about budgeting.

Most importantly, though, we talked about the crucial steps to fix things when you’re at the place where you’re saying “I can’t pay my bills”!

If you like this post, please follow my Budgeting board on Pinterest for more great tips from myself and top financial experts!

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About the co-author of this post:

Brian Loman is a longtime blogger, with a particular passion for personal finance and insurance. He also blogs about lifestyle and a range of other topics for a number of websites. He currently writes for ElcLoans, where he shares his knowledge on short-term loans.

While I have years of successful financial & budgeting experience and run several million dollar businesses and handled the accounting, P&L and been responsible for the financial assets of them, I am not an accountant or CPA. Like all my posts, my posts are my opinons based on my own experience, observations, research, and mistakes. While I believe all my personal finance posts to be thorough, accurate and well-researched, if you need financial advice, you should seek out a qualified professional in your area.
As an Amazon Associate I may earn a small comission from qualifying purchases if you click to Amazon from my site and choose to make a purchase. You can read my complete affiliate disclosure for more details.


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