TAKEN FROM http://time.com/money/collection-post/2791965/unable-to-pay-debts/: I Am Unable to Pay My Debts. What Can I Do?

The worst thing you can do is hide. “The longer you wait, the more difficult the problem will be to resolve,” says Gail Cunningham, spokesperson for the National Foundation for Credit Counseling. For example, if you can’t even make minimum payments on your credit cards, since you’ll incur late fees, the interest rate on the debt will spike and your credit score will take a drubbing. Use these tips to determine your plan of action.

If your financial bind is temporary

Ultra-high heating bills during a cold winter are sucking up all your extra cash? If you’re sure your situation will improve within a few months, call your creditors and explain the situation. “Chances are they’ll be willing to work with you,” says Cunningham. Before you call, come up with a clear plan for how you’ll pay your debts so you can provide specifics to the folks you owe — and don’t make promises you can’t keep.

If the problem is longer-term

Consider getting help. There are reputable debt counseling agencies that can help you manage your finances and assist you in repaying your debts. A good counselor will analyze your situation based on the information you provide about your income, expenses and debt; make recommendations to help you dig out of debt; and create an ongoing plan to improve your financial situation. To make sure an agency is legit, verify that it’s a non-profit and a member of the National Foundation of Credit Counselors or the Association of Independent Consumer Credit Counseling Agencies. You can also check with the Better Business Bureau to make sure there are no complaints lodged against the firm.

If you are in severe financial distress, your counselor may suggest a debt repayment plan (DMP) or perhaps even filing for bankruptcy. In a DMP, the credit counselor will negotiate with your creditors to reduce rates and other fees, and you’ll make a single monthly payment to the agency for the term of the plan, usually three to five years. You won’t be able to use your credit cards or apply for new ones while you’re on the plan. A DMP isn’t free, but the cost should be under $50 a month.

Read next: The Best Way to Pay Off Debts

Again, keep in mind that a counselor should only suggest a repayment plan in conjunction with a long-term plan to better manage your financial life. “If a counselor starts discussing a payment plan right away or the fees are high, run for the hills,” says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies. To find a quality counseling agency in your area, go to the National Foundation of Credit Counselors or the Association of Independent Consumer Credit Counseling Agencies. In addition, the U.S. department of Justice maintains a list of approved credit counseling agencies on its website

TAKEN FROM https://www.thebalance.com/how-to-set-up-a-debt-payment-plan-2385869: How to Set Up a Debt Repayment Plan in 6 Easy Steps

Michael Krasowitz/ Photographer's Choice/Getty Images

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By Miriam Caldwell

Updated January 30, 2018

Once you have decided it's time to get out of debt, one of the first steps you need to take to achieve that goal is set up a debt payment plan. 

Not only will a repayment plan keep you on task, it will also help you get out of debt faster since you'll be able to see real progress. Another plus of a debt repayment plan? By applying your extra money to one debt at a time, you will significantly speed up the debt repayment process.

If you set up a debt repayment plan – and stick to it – you will be surprised at how quickly you can pay off your debt. 

Follow these 6 easy steps to set up a debt repayment plan.

1. Make a List of Your Debts

First, you need to make a list of all your debts. Your list should include the minimum payment amount, the interest rate, and how much you owe total. 

This list should also include all of your debt: from credit cards and personal loans to student loans, even your mortgage. If you owe money to family and friends you should also include it on your list. 

2. Rank Your Debts

Next, you should rank your debts in the order you want to pay them off. Some experts recommend going from the smallest amount to the largest since this helps get the momentum going. 

Others recommend listing the debts from the highest to the lowest interest rate since this will save you the most money. The order you choose is up to you, but the important thing is to stick to the list once you make it.

3. Find Extra Money to Pay Your Debts

Now, you need to decide how much extra money you have a month to pay towards your debt. You may need to cut back spending in other areas so that you have the money to put towards your debt payment plan. 

Another option is to take on a part-time job or to pick up overtime hours at your current job to boost your earning power.

You can also sell items to earn extra money for your debt payment plan. Additionally, you may want to apply all the money you receive from gifts, bonuses or tax returns to your debt in order to pay it off more quickly. Sticking to a monthly budget will also help you find extra money to apply to your debt. 

4. Focus on One Debt at a Time

In order to succeed with your debt repayment plan, you should focus on paying off the first debt on your list. Put all extra money toward this first debt, while paying the minimum on all other payments. 

Here's the reasoning: When you focus on one debt at a time, you are able to pay off the debt more quickly, because more of the money will go directly to the principal balance and less is spent on paying interest. When you spread your extra money over several debts, you are lessening the impact it has on your debt because you are paying more interest. 

5. Move onto the Next Debt on Your List

Once you have paid off the first debt on your list, it's time to move onto the next debt, while paying the remaining debts' minimum balances. 

Continue to do this until you have crossed all your debts off your list. And keep in mind that when you first start working on your plan, it may seem like it will take forever to pay off your first debt, but as you work down your list and gain momentum, you'll be surprised at how quickly you can pay off the next one.

6. Build Up Your Savings

Once you've paid off all your debt, now is the time to focus on building up a savings account. This will help prevent you from going back into debt in the future. An emergency fund is one of the best tools that you can use to take control of your finances and avoid going into debt.

And when it comes to using credit cards in the future, use them responsibly or not at all. Your future self will thank you. 

Other Tips:

1. Review your bank or credit card's policies about extra payments and principal payments on a loan. This will help you get the most out of your extra payments each month. Some banks will charge you an extra payment fee, and others will not apply the extra payment just to the principal balance. If you understand how they charge, you will be able to work out a strategy that will help you apply the majority of the money to your principal each month.

1. A small emergency fund of about one month's salary can help you prevent from using your credit cards again while you are working on paying off your debt. Build this up first before you start applying extra money toward your debt.