How to deal with debt

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These steps can help you if you are having trouble paying your bills.

Create a budget
  1. To start, make a list of all of your income and expenses. This helps you know where your money is going now.
  2. In another list, write the things that you must spend money on. For example:
    1. your rent or mortgage,
    2. healthcare costs,
    3. childcare expenses,
    4. heat/utilities, and/or
    5. groceries.
  3. Subtract the things you must spend money on from your income. If you have money left over, decide how much you want to save and how much you want to spend on non-essential items.

See a sample budget that includes instructions, an example, and a worksheet.

Places you can get free help with budgeting:

Plan which bills to pay first

If you don’t have enough money to pay all your expenses on time, you can make a short-term plan to figure out which bills to pay first.

Usually, these are the most important expenses to pay off:

  1. Mortgage and rent payments;
  2. Food:
    1. If you do not have money for food, contact the Department of Transitional Assistance (DTA). You may be able to get cash assistance and SNAP food benefits.
    2. You can also contact Project Bread’s FoodSource Hotline at 1-800-645-8333.
  3. Health insurance
    1. You may qualify for Medicare, MassHealth, or a ConnectorCare program for lower-cost health insurance.
  4. Utilities
    1. This includes your cell phone.
    2. The utility company may work with you, even if you are behind or you cannot pay the whole amount. They may be willing to keep your utilities on or turn them back on, if you can pay them something. See Stop your heat and electricity from getting shut off.
    3. You may qualify for the Massachusetts Home Energy Assistance Program. 
  5. Car loan / transportation expenses
  6. Any other obligations (credit cards, loans, etc.)

More help: The Consumer Financial Protection Bureau has a toolkit to help you decide which bills to pay first.

Pay off the most important debts first
  1. Repay your debt only after you pay for your needs.
  2. After your basic needs are met, it’s usually a good idea to prioritize paying for things the seller or the creditor can repossess (take back) if you don’t pay, like a car or anything purchased on a “rent to buy plan."
  3. Credit cards debts, doctor and hospital bills, and accounts with merchants (like store-specific credit cards), are called “unsecured debts.” This means you did not promise to give any of these creditors any of your property in exchange for missed payments, so these debts are typically not as important.


  • Do not pay any debts before you pay your mortgage, rent, utility payments, and car loan.
  • Do not pay a creditor or a debt collector just because they say they are going to take you to court.
    • If you have credit card debt, a debt collector must get a court order to take anything from you. The debt collector cannot take money and/or things that are “protected“ from collection.
  • Talk to a lawyer to find out if you have a legal reason not to pay the debt and/or what your rights are if you are unable to pay. 
Talk to your creditors about making payments

Contact creditors as soon as you have trouble making payments. Many creditors will try to work with you if they see you are trying to pay your debt. They may put together a better payment schedule for you. You can ask them to:

  • stop charging you interest,
  • not increase your interest rate, and
  • not charge you late fees.

If you do not own anything you can sell to pay the debt, tell the creditor.

If you only have protected assets and your income is collection-proof, tell the creditor. You can use the sample collection-proof letter to write to the creditor.

If you cannot afford to make payments, you do not have to agree to make payments.

Do not allow the creditor to pressure you into paying something that you cannot afford.

For more, see What are my rights when debt collectors contact me?

Think about setting financial goals

You may also want to set financial goals. The Setting SMART Goals Toolkit from the Consumer Financial Protection Bureau teaches you how to set goals that are:

  • (S)pecific,
  • (M)easurable,
  • (A)chievable,
  • (R)elevant, and
  • (T)ime bound.
Think about loan consolidation or bankruptcy

Loan Consolidation

Credit card companies, banks, and credit unions may offer to “consolidate” your debts for you. This means they will offer you one big loan to pay off all your smaller loans. Be careful. In the end, you may pay more interest than you pay now. Look at the interest rate and late fees for each of your debts. If you are able to get rid of some debts through bankruptcy, you may not want to take out more money to pay them off.


Filing bankruptcy stops all your creditors from asking you for money and collecting your debts. Bankruptcy has serious effects. It is best to talk to a lawyer. To learn more, see Answers to Common Bankruptcy Questions.


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