The Center For Debt Management
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Tips For Major Life Events:
Ways to Cope Financially During and After a Big Change

... Continued From Previous Page

A medical emergency. First, carefully review all doctor and hospital bills and insurance claim payments/denials, because mistakes do happen and uncorrected errors can be costly. If you are unable to resolve a billing dispute with a doctor, hospital or insurer, contact your state consumer protection office or insurance regulator for guidance.

Think twice before using credit cards to pay for large medical expenses, especially if you are already deep in debt or if it will take years to pay off the card balance, in which case the interest charges could add up significantly.

If you can't afford your medical or hospital charges, don't allow the debt to be turned over to a collection agency, which could damage your credit score. Instead, contact the service provider's billing department to try to negotiate a reduced bill or a payment plan with monthly payments. Also ask about assistance from a government program or charitable organization.

You can also consider turning to a credit counselor for guidance, but choose one carefully because some offer questionable or expensive services and others may be scams.

If your medical bills are sufficiently high, you could qualify for a federal tax deduction, so be sure to save bills and cancelled checks or other receipts for your tax preparer.

A divorce. Consult legal counsel because uninformed decisions could cost you. Also consider discussing tax issues with an accountant or other advisor because certain decisions, such as who will claim children on his or her tax return, can affect each parent's tax liability. .

You also may be able to reduce some legal fees by working with a mediator to resolve issues such as child custody.

Cancel joint credit cards to prevent the other spouse from running up large bills. Start or build your own credit history independent of the marriage, such as by opening a new credit card in your name only. Decide who is responsible for debts incurred during the marriage.

It's also important that you update your will and the list of beneficiaries you designate on life insurance policies, retirement savings accounts and U.S. Savings Bonds, so your money and other assets will go to the right people upon your death.

A job loss. Try to keep spending under control so you can pay your bills using existing bank and brokerage accounts for, say, the next three to six months. If possible, avoid withdrawing or borrowing money from your retirement savings. If you anticipate problems paying debts, such as your mortgage or the minimum due on your credit card, contact your creditors immediately and attempt to work out a payment plan.

One reason to keep loan and credit card payments current is so that you can maintain the best possible credit record. Prospective employers may review your credit reports when you apply for a new job.

Also, carefully review your employer's severance benefits, including the temporary continuation of your salary and health insurance, and try to negotiate a better deal.

You can't make your mortgage payment. Regardless of the cause, if you're having difficulty paying your mortgage, you should contact your loan servicer and find out if you qualify for modified loan terms or other options to help you keep your home instead of losing it to foreclosure.

You're having problems making credit card or other loan payments. No matter what triggers a personal financial crisis, the important thing is to be proactive and address the problem as soon as possible by contacting your lender to try to negotiate a long-term, workable solution.

And if you need help negotiating with a lender or otherwise getting a debt problem under control, consider asking an attorney, accountant or another trusted advisor to refer you to a reliable credit counselor who, at little or no cost, can help you develop a recovery plan. If you're facing problems on a loan secured by your home, including a home equity loan, see the previous bullet point about mortgage payments.


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