How to Catch Up on Debt Payments After Falling Behind

December 27, 2023
7 min read

Falling behind on your debt payments is overwhelming. In addition to the overdue balance itself, you often incur late fees and additional interest charges, making the prospect of catching up feel daunting. 

If you’re in the situation, your creditors may demand a “catch up payments program.” This term refers to the amount you must pay to bring your account back up to date. It includes the current scheduled payment plus any overdue amounts. 

If you’ve fallen behind on your bills, know that there are strategies you can use to get back on track. Keep reading for five impactful tips on how to catch up on your debt. 

Tip #1 – Assess Your Financial Situation

A clear picture of your financial situation is vital for catching up on your debt payments. Here’s how. 

Step 1: Total up your debts

The first step is to determine how much you need to put toward your debt to bring your payments back up to date. Note the monthly payment amounts and the interest rates for each payment. The numbers may feel impossible, but remember, this is just the first step in your debt catchup plan. Stick with it.  

Step 2: Estimate your income

Next, estimate your monthly income. If you have a salaried job, this will be easy. It may be more challenging if you’re a freelancer or do shift work. To the best of your abilities, estimate how much you’ll earn for the next several months.

Step 3: Create a Budget

Now that you’re clear on how much money you’re bringing in each month and what you need to pay to bring your debt payments up to date, it’s time to create a budget. 

Start by noting down your essential, recurring expenses. This may include things like:

  • Rent
  • Health insurance premiums
  • Phone/internet
  • Utility bills
  • Car payment
  • Car insurance
  • Student loan
  • Debt payments
  • Savings account contributions

Next, write down your variable expenses. Some of these will be things you spend money on every month, like a gym membership or groceries, and others will be more highly variable, like a haircut or concert tickets, that don’t necessarily occur every single month. Do your best to note down everything you spend money on in a month.

This includes things like:

  • Fuel
  • Groceries
  • Personal care expenses (haircuts, etc)
  • Gym membership
  • Netflix or Spotify subscription
  • Restaurants

Once you’ve totalled up your monthly expenses, compare that number with your income. Create a budget that allocates every dollar of your income toward the categories in which you typically spend each month. This will form your monthly budget.

If you’re routinely spending more than you make, look for areas to reduce costs. This may mean giving up your Netflix subscription or gym membership for a few months while you get back on track financially. In extreme cases, you may need to reduce your grocery expenses or look for a more affordable phone plan to reclaim some room in your budget.

If you cannot cut any expenses from your budget, you may need to find ways to earn extra income to stay caught up on bills. 

Tip #2 – Prioritize Your Payments

The quickest way to catch up on your debt will be to prioritize your payments effectively. Make your overdue payments your top priority, as they may harm your credit score and incur late fees that compound their cost. 

Make the minimum payments on any other debts while you sink your extra cash into bringing your overdue accounts up-to-date.

Once your accounts are all up-to-date, prioritize paying down the debts with the highest interest rates first. This way, you’ll reduce the cost of borrowing money and pay down the principal faster. 

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Tip #3 – Negotiate with Creditors

Negotiating with your creditors can be a powerful way to help you get caught up on your debt payments. This may seem counterintuitive, but your creditors are often very willing to work with you to make you a catch up payments program that is more manageable for your specific situation. After all, the alternative is that they don’t get paid at all. 

Contact your creditors one at a time and explain your situation. Let them know that you’re working to get catch up on your debt and ask if they can offer you a catch up payments program to help bring your account back up to date. Often, they’ll be willing to spread your direct payments out over a few months so you can catch up without incurring additional late fees. 

In some cases, creditors may be willing to settle your debt for a lump sum that is less than the full amount you owe. Have your budget handy when negotiating to ensure you settle on a direct payment amount that’s realistic for you. 

Tip #4 – Utilize Government Programs

There are government programs that provide direct payments to Canadians who need help making their next on-time payment. 

Examples of such programs include:

  • Employment Insurance (EI) is a program that provides temporary direct financial relief for individuals and families in need of financial support due to unemployment.
  • Canada Child Benefit (CCB) is a program that offers tax-free financial support to eligible parents with children under 18. 
  • Canada Workers Benefit (CWB) is a refundable tax credit for low-income workers and families. 

These are just a few examples of the many financial and social assistance programs that exist in Canada that aim to provide direct financial relief. There are options for individuals of all ages and life stages, including veterans, those with disabilities, new immigrants, eligible parents, and retired folks. 

Do your own research to determine what types of programs are available in your province and their eligibility requirements. Take advantage of these direct payment programs if you are eligible, as they are designed to support individuals experiencing financial hardship. 

Tip 5 – Seek Financial Counseling

Financial counselling can be a fantastic way to regain control of your finances if you’ve fallen behind on your bills. Often referred to as credit counselling, this is typically a service tailored to your financial needs that is intended to improve your financial literacy.

Credit counsellors can help you perform a full financial review, create a realistic budget, and design a plan to repay your debt. They can also negotiate with creditors on your behalf to reduce interest rates, avoid fees, and come up with a catch up payments program that fits your budget. 

It’s important to be wary when choosing a credit counselling service, as there are many predatory, for-profit agencies out there seeking to take advantage of those in dire financial circumstances. Reputable agencies won’t make bold claims about debt repair, and they won’t charge an up-front fee. 

Bree’s guide to credit counselling outlines everything you need to know about how to choose a trustworthy credit counselling service. 

The bottom line

Falling behind on debt payments may leave you wanting to bury your head in the sand. But don’t. Ignoring the problem will only make it spiral out of control. The best approach is a proactive one. 

Creating a realistic budget, negotiating with creditors, getting on a payment program, making one on-time payment at a time, and taking advantage of financial assistance will help you get back on track financially. 

Remember, consistency is key. Following your payment program and sticking to your budget will help you make progress on your debt while reducing the emotional burden of debt.

December 27, 2023
7 min read