Released December 2, 2008

URBANA, Ill. -- If your family's income has dropped significantly, losing the roof over your heads may be your biggest fear. But it doesn't have to happen, said University of Illinois Extension consumer and family economics educator Susan Taylor.

"Planning and being proactive can help you avoid eviction from your rental unit or losing your home. There are many reasons for not paying your debt. However, there is no reason for not communicating with your creditor," she said.

"If you're having trouble paying your rent, tell your landlord before the rent is due. Suggest making smaller payments for a month or two with the understanding that you'll catch up when your income increases again. It costs money for a landlord to change tenants so they may be willing to work with you," she said.

In Illinois, if you do not pay your rent according to the terms of the lease, your landlord can take the following steps:

1. The first time your rent is late, your landlord may give you a five-day notice to pay the rent. The landlord is not required to accept payment of a lesser amount; if he does, he may waive his rights to the entire amount. If you do not pay within five days, the landlord can consider the lease ended and start a suit for possession. 2. Under the Illinois Distress for Rent Act, the landlord can peacefully seize certain personal property of his tenant as compensation for rent claimed to be due. Check with the Illinois Attorney General's website, http://www.ag.state.il.us/consumers, for more details.

If you rent and think that your financial problems will continue for more than a few months, consider moving to lower-cost rental housing, she said.

"If you own your home and you're having trouble making your mortgage payments, try to cut back on other expenses so you can apply those funds to your house payments. Visit http://www.ToughTimes.illinois.edu and read "Setting Spending Priorities" and "Strategies for Spending Less," she advised.

Contact your lender immediately before you miss a payment, she said. "If you do miss a payment, you may have defaulted on your contract and your lender can begin foreclosure on your home.

"On the other hand, if you talk with your lender, you may be able to skip a payment or arrange a lower payment. Go in person and take along a new spending plan that fits your reduced income. Most lenders would rather avoid the time and cost involved in a foreclosure if another alternative can be worked out," she said.

If your diminished income appears to be long lasting, consider these other options:

1. Take in a boarder to help pay the mortgage. 2. Rent your home to someone else and rent less costly housing for yourself. (Check the effect this will have on taxes, and changes needed on insurance coverage.) 3. Sell your house and buy or rent less costly housing. 4. Move in with relatives or friends and offer to share some of the housing costs. 5. Deed your house back to the lender. You may not lose much. If you've been paying on a 30-year mortgage for 10 years, you've only paid about 10 percent of the house. If you do deed the house back to the lender and the house has decreased in value, you are still responsible for the amount of the loan and must pay the lender the difference. If, by staying in this house, you won't have enough money for food or other necessities, you may find it less stressful to leave the house and find less expensive housing.

Remember that not paying insurance on your mortgaged home is considered defaulting on the mortgage, she said. Again, explain your family's situation to your insurance agent and offer a different payment plan.

"You may want to change to a monthly, quarterly, or semi-annual payment plan; change your deductible; change to a more basic coverage; and check for discounts if all your insurance--house, auto, etc.--is with the same company," she said.

If you find you cannot pay your real-estate taxes, make full payments on your utility bills, or pay your phone bill on time, attempt to negotiate more favorable terms for yourself, she said.

If your utilities are about to be cut off, check with your power company to see if fuel assistance is available. You will receive a notice if your phone service--landline or cell--is about to be disconnected. Call and explain the problem. If you are unable to make arrangements with the phone company, you'll have to pay the bill plus interest on the unpaid balance before your phone service is restored. Customers are allowed one free reconnection each year, she said.

"Embarrassed as you may be about your problems, confront them and talk with your landlord or lender. It pays off to be upfront and proactive in these situations," she said.

For more help with meeting serious financial challenges, be sure to visit U of I Extension's "Getting Through Tough Financial Times" website at http://www.ToughTimes.illinois.edu.

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http://www.aces.uiuc.edu/news/stories/news4585.html

Contacts: Susan Taylor, (708) 720-7520, setaylor@illinois.edu

Phyllis Picklesimer, 217-244-2827, p-pickle@uiuc.edu