B3459-3 MMANAN AAGIGIGINGNG between Deciding which bills to pay first

hen you are between jobs, the Answer these Wpaychecks may questions stop coming, but the bills don’t.When you JJOBOBS S ■ How long is your present situation do not have enough money to cover your likely to last? Linda Boelter monthly expenses and pay all your creditors, ■ How much income can you count on you face some tough financial decisions. each month? You may be tempted to use cards, ■ How much money do you need to take out a home equity , or borrow cover essential monthly living money to pay bills. But taking on more expenses? How much is left for debt is generally not a good idea. Unless repayment? your situation turns around quickly, more debt only creates bigger problems. ■ What assets — savings or items you could sell — do you have that could Instead, focus on cutting your spending help pay off your debt? and working with your creditors to reduce your payments until your situation ■ Who are the creditors you owe, and improves. how much do you owe each one? List the monthly amount due, the amount past due, and the total balance you Sizing up your owe. Use Worksheet 1 on page 2. situation ■ What is the rate for each debt? When your bills add up to more than you You may be able to transfer balances can pay, you need to contact the people to from a high-interest loan or whom you owe money — your creditors. to one with a lower .

Explain your situation, and ask for their ■ What is the collateral — security for help. installment or credit contracts? If Creditors are usually willing to work with you are not sure which loans are you if you contact them before you get secured, check the credit contracts. List behind in your payments. these items in the column labeled Before you talk with your creditors: “Security for loan” on the worksheet. Carefully examine your situation to decide These answers are important to know for whom, how much, and when you can pay. talking with creditors. For example, if you Completing Worksheet 1 on page 2 is the use your car as collateral on a loan and you first step in preparing a repayment plan (cannot repay that loan on time), you can afford. the creditor can repossess your car to pay the debt you owe. For help completing Worksheet 1, see the following fact sheets in this series: Setting spending priorities/Cómo establecer las prioridades de gastos, Strategies for spending less/Cómo gastar menos, and Making the most of what you have/Cómo sacar el mayor provecho de lo que tiene. 2

Worksheet 1: Monthly owed To complete this worksheet:

■ Answer the questions on page 1.

■ List all the creditors to whom you owe money. Be sure to include all credit card accounts, merchant charge accounts, installment loans, personal loans, and past due accounts.

Monthly Amount Total Interest Security Creditor payment past due balance owed rate for loan

TOTAL debts owed:

MANAGING BETWEEN JOBS 3

Your reduced income may fall within Who gets paid first? guidelines for receiving government food What will you lose if You are legally obligated to pay all your assistance: creditors. But if there is not enough the bills are not paid? money to pay all your bills, you must ■ To find out if you qualify for Food In addition to your house or car, you can decide which creditors to pay and how Stamps, contact your county or tribal lose other property if you fail to make much. social or human services office. payments. Loans to purchase furniture, appliances, boats, recreational vehicles, and ■ To see if you qualify for the Women, One way to do this might be to divide the electronic equipment often include the money available, and pay every creditor Infants, and Children (WIC) nutrition program, contact the local WIC office item as collateral for the loan. Even so, part of what you owe them.This may seem repaying secured loans may have a lower fair, but it does not always work. (www.dhfs.state.wi.us/wic), or tribal or public health department.You do not priority, especially if you can manage Each creditor must agree to reduce the need to be on public assistance to without the item. amount they receive and extend the receive WIC benefits. payment period. How much do you still owe? If you need a vehicle to keep or get a job, This method also does not take into paying car loan or lease payments is a Determine how much you have paid on account that some bills, such as those for priority. Because the vehicle is usually the each loan and how much you still owe. If essential living expenses, are more impor- security for the loan, you must also make you have only one or two payments tant to pay than others. Instead, decide payments on time to avoid . remaining on a loan, it may be worthwhile which bills must be paid right away and to finish paying and get that debt out of If you lease a vehicle, check your lease for which ones can wait. the way. penalties that result from default (failure to Here are some questions to help guide pay) or early termination of your lease. You may be able to return newer items or your decisions. sell them to pay the debt.You will need Take care not to let medical insurance slide the creditor’s permission to sell an item when money is scarce. If anyone in the used as security for a loan. If you choose to What will most affect family becomes ill or injured, medical bills surrender the item to the creditor, you will can be devastating without insurance. your family’s health still be required to pay the difference If you lost your job and had medical insur- between the market value and the amount and security? ance through your employer, you should remaining on the loan. Housing, utilities, food, transportation, and receive a notice about continuing your Or you could try negotiating with the medical care usually take priority. coverage. If you can afford to pay the creditor. If you owe more than the market premium, continuing the insurance is gen- Unless you plan to move to less expensive value of the item, offer to pay a little less erally a good idea — especially if someone housing, keeping up with your rent or than its value to settle the debt. Be sure to in your family has an existing medical con- mortgage payments is essential to avoid get the agreement in writing. eviction or losing your house. dition that requires care. Also make sure the creditor agrees to Often, the only way to avoid restrictions for For suggestions on what to do if you remove any negative entries that have a pre-existing condition is to maintain cannot make payments for rent, mortgage, been reported on your credit record as the coverage with the same insurer. For more property tax, or utilities, see the fact sheets result of that loan. in this series Keeping a roof overhead/Cómo suggestions, see the fact sheet in this asegurarse de que la familia tenga donde series Meeting your insurance needs/Cómo cobijarse and Strategies for spending pagar por el seguro que necesita. less/Estrategias para gastar menos. If you do not have health insurance: While food is essential, there are ways you Your reduced income may qualify you for can reduce the amount you spend on food Medicaid — medical assistance for people each month. For ideas, see the fact sheet in of any age who cannot otherwise afford to this series Strategies for spending less/Cómo pay their bills. Uninsured children may gastar menos. Or contact the Wisconsin qualify for BadgerCare. Contact your public Nutrition Education Program at your or tribal health department. county UW-Extension office: www.uwex.edu/ces/cty.

DECIDING WHICH BILLS T O PA Y FIRST 4

Property taxes You may be able to have payments Do you owe child deferred — or postponed — during support, back taxes, or If you are a homeowner with reduced periods of unemployment or financial income: Make sure you know when your hardship. But you cannot qualify for a student loans? property taxes are due. In most of deferment once your is in Wisconsin, property taxes can be paid in default. Child support order two installments: For more information on repaying student Failing to pay a child support order can ■ The first is due January 31 and is loans, request a copy of The Student have serious consequences.You may be payable to the local treasurer. Guide/Guía para estudiantes from the held in contempt of court, have your ■ The second is due July 31 and is Federal Student Aid (FSA) Information garnished, have your tax refund payable to the county treasurer. Center at (800) 433-3243 or intercepted, or be jailed. If you are late paying property taxes: www.studentaid.ed.gov. If your income has dropped sharply: You will receive notice of any actions.Take Contact your family court to find out about these notices seriously. obtaining a lower support order as soon as Do you have Beginning February 1 or the day after the possible.This cannot be done retroactively. first installment is due, you will be charged outstanding balances If you do not modify the order and fail monthly interest on the full unpaid on credit or charge to make child support payments: You are property tax, adding to your total bill. legally responsible for all unpaid support Soon after the second installment is due, card accounts? obligations. the county sends a notice to all property Making minimum monthly payments on owners who still owe taxes.This informs your credit cards and department store Income taxes due you that if you do not pay property taxes charge cards will… If you owe unpaid income taxes: The within 2 years, you will lose title to your ■ Keep these accounts current. Internal Revenue Service (IRS) may seize property. Eventually, unpaid taxes will ■ Avoid costly penalties and charges for your paycheck, account, house, or result in the sale of your property through late payment. other property. an auction. ■ Avoid negative reports on your credit If you cannot pay the total amount due: If you cannot pay your property taxes: record. Contact the Wisconsin Department of Contact your county treasurer and explain However, paying only the minimum Revenue and the Internal Revenue Service your situation right away. If you cannot pay amount due — usually 2 to 3 percent of (IRS) right away. Ask for information on for a while and resume payments later, you the total balance owed — will increase repayment plans, and find out whether may still face foreclosure. Find out what your finance charges and extend the time your reduced income makes you eligible you must do to prevent this. for tax . it takes to pay off the balance.That means you will end up paying much more than Contact the Wisconsin Department of Student loans your purchases are worth. Revenue at (608) 266-7879 or at Failing to repay federal student loans Since most credit card and other charge www.dor.state.wi.us. As of 2004, there is a according to the terms of your promissory card debt is unsecured — not backed by $20 fee to make an installment agreement. note has consequences nearly as serious as any collateral — it often has lower priority Contact the Internal Revenue Service (IRS) those for failing to pay child support.The than repaying secured debt. Don’t be pres- at (800) 829-1040 or loan holder may garnish your wages or sured into paying more than you can TTY: (800) 829-4059.When you reach a bank account, intercept your tax refunds, afford on credit cards or other unsecured person, ask to be transferred to “advanced seek payments from your co-signer, or sue debts. It is usually more important to keep accounts.” Spanish help is available toll- you for repayment. up your home or vehicle payments. free (press 8).To order tax forms and publi- If you are having trouble making your cations, call (800) 829-3676 or check the federal student loan payments: Contact website at www.irs.gov. Allow 2 weeks for your loan servicer immediately. A number delivery. of repayment plans are available, but only if you take the initiative before you miss payments.

MANAGING BETWEEN JOBS 5

Credit counseling What about your Stick to your plan! If you are having difficulty paying credit After you have worked out a repayment card debt: A non-profit Consumer Credit credit rating? plan, follow through with it. Make the Counseling Service may be helpful Nonpayment of bills is reported on your payments you promised. credit record, which can damage your because of their relationships with major If you fall behind on your new commit- credit card companies. ability to get credit or increase the cost of credit. A prospective employer may ask to ments, creditors will be less understanding. Most local credit counseling agencies see your credit record. If you fail to pay as promised, creditors may provide individual budget counseling and hire a collection agency or start legal can set up debt management plans to pay That’s why it’s important to contact all action against you. your creditors.Wisconsin laws limit fees to creditors immediately if you cannot pay your bills. If you pay something on each Pretending your money problems don’t $50 for the initial budget set or $25 for exist won’t make the problems go away. clients who sign up for a debt manage- debt as agreed, creditors are less likely to report problems to credit bureaus. It’s better to face the situation honestly. ment plan. Openly discuss spending decisions with all Monthly fees vary for debt management family members, so everyone understands plans, so be sure to find out before signing Your repayment plan the changes and sacrifices needed for your any agreement. Some companies charge a Once you have determined how much plan to succeed. flat monthly fee, while others charge based money you have for monthly living Remember: No matter how bad your situ- on the number of creditors in your plan. In expenses and for paying off debts, use ation may be, you cannot afford to ignore Wisconsin, the maximum fee cannot your answers to the questions on pages 3- your bills and creditors. Prompt action is exceed 10 percent of the money paid to 4 to decide how much to pay each very important.Take charge. Let your credi- creditors or $120, whichever is less. creditor. tors know you are having trouble before Many companies offering credit counsel- Establish a repayment plan that shows you miss payments and the situation ing aggressively advertise on television how much to pay monthly on each bill. Put worsens. and on the Internet. Some are legitimate this plan in writing. PowerPay is one type and helpful, while others have drawn many of basic online program that can help you complaints for deceptive practices, organize your bills. One nice feature is that improper advice, excessive fees, and abuse it can produce a calendar detailing who of non-profit status. needs to be paid and when.This free Beware of companies that… resource is available at extension.usu.edu/cooperative/powerpay. ■ Try to push you into a With this repayment plan, you are ready to contact each creditor to explain your situa- ■ Offer loans tion.Tell each one how much you can pay, To find out if a company is licensed in and when you can pay. Wisconsin: Check “Adjustment Services For suggestions on how to contact credi- Companies” on the Wisconsin Department tors and what to say to them, see the fact of Financial Institutions web site at sheet in this series Talking with creditors/ www.wdfi.org/fi/lfs/licensee_lists. Comunicación con los acreedores. To find the nearest consumer credit Some businesses — such as utility compa- counseling program: Contact the nies, hospitals, and medical clinics — have National Foundation for Credit Counseling special counselors for customers who (NFCC) at (800) 388-2227 — English, cannot pay their bills.These counselors can (800) 682-9832 — Spanish, or set up a budget plan to help you make www.nfcc.org. your payments.They can also tell you if you qualify for any government assistance programs that help with home energy or medical bills.

DECIDING WHICH BILLS T O PA Y FIRST 6

For help deciding which bills Deciding if is an option for you Resources (B3459-09)/Cómo decidir si la protección Know your rights to pay first… por bancarrota es una buena opción See these money management fact sheets para usted (B3459-09S) Look for these consumer guides at your in this series, in English or Spanish: Taking care of yourself (B3459-10)/ local public library or online. If you do not Cómo satisfacer las necesidades person- have a computer, most libraries have one Setting spending priorities (B3459-01)/ ales (B3459-10S) you can use. Cómo decidir cuáles son los gastos más importantes (B3459-01S) How you can help when mom or dad is Detweiler, Gerri. The Ultimate Credit unemployed (B3459-11)/Cómo puedes Handbook: How to Cut Your Debt and Strategies for spending less (B3459-02)/ ayudar cuando tu papá o tu mamá está Have a Lifetime of Great Credit. 3rd ed. Cómo gastar menos (B3459-02S) sin empleo (B3459-11S) New York: Plume/Penguin, 2003. Deciding which bills to pay first Helping children cope (B3459-12)/ Leonard, Robin. Money Troubles: Legal (B3459-03)/Cómo decidir qué cuentas Cómo ayudarles a los niños a sobrellevar Strategies to Cope with Your Debts. 9th pagar primero (B3459-03S) las dificultades (B3459-12S) ed. Berkeley, CA: Nolo Press, 2003. Talking with creditors (B3459-04)/ Community agencies that can help National Consumer Law Center. Surviving Comunicación con los acreedores (B3459-13)/Las agencias comunitarias Debt: A Guide for Consumers. 3rd ed. (B3459-04S) pueden ayudar (B3459-13S) Boston: NCLC Publications, 2002: Keeping a roof overhead (B3459-05)/ www.consumerlaw.org/publications/ Cómo asegurarse de que la familia tenga Looking for a job—Watch out for scams guides/surviving_debt.shtml. donde cobijarse (B3459-05S) (B3459-14)/Búsqueda de trabajo— Tenga cuidado con las estafas Sember, Brette M. Repair Your Own Credit Meeting your insurance needs (B3459-14S) and Deal with Debt. Naperville, IL: (B3459-06)/Cómo pagar por el seguro Sphinx Publishing, 2003. que necesita (B3459-06S) Where to go for help finding a job (B3459-15)/Dónde conseguir ayuda Ventura, John. Beating the Paycheck to Bartering (B3459-07)/El trueque para encontrar empleo (B3459-15S) Paycheck Blues. Chicago: Dearborn (B3459-07S) Financial Publishing, 1997. Starting your own business (B3459-16)/ Making the most of what you have Cómo iniciar su propio negocio Wisconsin Department of Financial (B3459-08)/Cómo sacar el mayor (B3459-16S) Institutions. Wisconsin Consumer Act: provecho de lo que tiene (B3459-08S) Consumer Credit Topics of Interest. Retrieved June 2004: www.wdfi.org/wca/consumer_credit/ credit_guides/default.htm.

Copyright © 2006 by the Board of Regents of the University of Wisconsin System doing business as the division of Extension of the University of Wisconsin-Extension. All rights reserved. Send copyright inquiries to: Manager, Cooperative Extension Publishing, 432 N. Lake St., Rm. 103, Madison,WI 53706. Author: Linda A. Boelter, CFP®, professor emeritus, University of Wisconsin-Extension. Reviewers: Marsha A. Goetting, CFP®, professor and extension family economics specialist, Montana State University; Michael Gutter, assistant profes- sor and family financial management specialist, University of Wisconsin-Extension; Brenda B. Janke, Lincoln County family living educator and family financial specialist, UW-Extension; Elizabeth Kiss, family resource management specialist, Purdue University; and Barbara Roder, Fond du Lac County family living educator and family financial specialist, UW-Extension. Produced by Cooperative Extension Publishing, University of Wisconsin-Extension. An EEO/AA employer, University of Wisconsin-Extension Cooperative Extension provides equal opportunities in employment and programming, includ- ing Title IX and Americans with Disabilities Act (ADA) requirements. This publication is available in English or Spanish from your Wisconsin county UW-Extension office (www.uwex.edu/ces/cty) or from Cooperative Extension Publishing.To order, call toll-free:1-877-WIS-PUBS (877-947-7827) or visit our web site at cecommerce.uwex.edu. Managing Between Jobs: Deciding Which Bills to Pay First (B3459-03) R-05-2006