Don't panic! Many people have never experienced a severe financial crisis. Your first reaction may be fear that you will be homeless, lose your car, or be unable to feed your family. Panic can lead to risky financial decisions made on impulse. Take a deep breath, and let's talk about what steps you can take to get through this situation. Don't worry about your credit score right now. Don't let harassing calls from debt collectors influence your decisions. Leave your retirement accounts alone It's very tempting to cash in that old 401k from a prior employer, borrow from your 401k, or withdraw the money from your IRA when you can't pay all of your financial obligations. This is especially true when facing an extended period of reduced income. Don't do this before you exhaust all other options and have a discussion with an experienced nonprofit counseling agency or consumer bankruptcy attorney. Creditors cannot levy, attach, or otherwise get access to your retirement savings. I have seen too many instances where clients exhausted all of their retirement savings trying to preserve their credit score, and still couldn't service their debts. These clients now only have Social Security available for retirement income. Had they consulted with a qualified nonprofit counselor or consumer bankruptcy attorney earlier, they would not have lost their retirement savings. Focus on the essentials When funds are limited, essential expenses for housing, transportation, utilties, food and medicine must be paid first. For example, stop paying your minimum credit card payments if that would mean you won't make your car payment. Child support is another priority expense, because not paying child support can get you put in jail. Old, charged off accounts are the least important bill to be paid. Keep your rent/mortgage, car payment/car insurance, and utilities current as much as possible. Contact your creditors and try to work something out The worst mistake you can make is avoiding your creditors in hard financial times. Reach out to your landlord or your mortgage company as soon as you start struggling, and let them know what is going on. Let your car lender know your specific circumstances. Be prepared to provide proof of your reduced income, including evidence of your unemployment benefit, and if a written application is required, pay attention to what proof your lender requires. Send all written documentation in a manner you can track and verify they received it. Priority Mail is a relatively inexpensive method that will give you a tracking number you can use to verify delivery. Follow up with your creditor to confirm receipt, and make sure you understand what happens next. Keep good notes of all phone calls (date, time, who you spoke to and the phone number you called). Track deadlines and expiration dates for relief your creditor may offer (such as skipping a payment or two on your credit cards). All creditors should be willing to send you something in writing confirming their agreement. A verbal agreement is not enforceable, so demand written confirmation. Avoid scams - Contact a nonprofit agency for assistance If you are not getting anywhere with your creditors, contact a nonprofit agency for assistance. You can find a local agency at nfcc.org . Avoid "credit repair" agencies, debt settlement companies who promise they can "consolidate" your debt and negotiate with your creditors, and companies that charge fees to help you avoid foreclosure or resolve student loan debt. You should also avoid getting a large loan from an online lender to pay off all of your credit cards until you speak to a nonprofit agency or a consumer bankruptcy attorney. Refinancing credit card debt often leads to continued financial problems. Contact an attorney If you get sued for debt, or if a nonprofit agency tells you that their programs are unlikely to help your situation, contact a qualified consumer bankruptcy attorney for advice. He or she will explain all of your options to deal with your financial situation. Bankruptcy may or may not be the best alternative. Many people are able to stop repossessions and evictions, keep all of their assets, and discharge debt they are unable to pay by filing bankruptcy.