Sometimes you find yourself having some trouble paying off some of your bills. The first rule of thumb is to take care of your personal needs first and then work on paying back your creditors. Certain things are paramount, like car insurance and mortgage/rent, which means you need to look at items like credit cards and loan payments to try to negotiate a lower payment rate.

Before we get too far into that, you need to know that this should be your second to last line of action, which the last thing to think about being bankruptcy. You should consider these two points before you go down the negotiation road.

The first is that you need to first go the budgeting route, whether you need help from someone else or if it’s something you can do on your own. You need to know where you stand to figure out if the problem is lack of money or lack of process.

The second thing you need to know is that once you start, you’re going to have to be ready to give up a few things. Credit card companies are always willing to work with people to pay down balances but they expect you to stop using the card and a few of them are going to increase your APR (annual percentage rate). Most of them won’t report you to a credit agency but that’s always a possibility, especially if you get a deal and don’t stick with it.

Once you’ve thought about and understand the realities of going forward with this task, the first step is to pick up the phone and make the call. Just like the IRS you’re going to find that your creditors will be willing to work wit you.

The second step is to let your creditor know what’s going on in your life… without too much detail. If you’re suddenly unemployed, tell them that. If you only need a deal for a few months, that will help you as well. What you might find is that some of your loan creditors have built in times when you can skip a payment or make a reduced payment without any penalties. Many automobile creditors have deals like this, because interest still accrues and in the long run they end up making more money off you. If you only needed a bit of short term relief this will work out in your favor.

The third step is having an amount you believe you can pay your creditor. If you have more than one of these folks to talk to you’re going to need to know how much money you have overall… which once again means putting together budget numbers. If you already have an amount in your head and it’s at least half of what you normally pay, you have a great chance of getting your recommendation approved. If you can pay more, even better. If you mention something like $10 bucks a month and you were paying $150, they’re not going to accept it and you’re going to spend time negotiating based on their recommended limit.

The third step part two is asking them what they can do for you without giving them an amount. This is risky because they could come in higher than what you can pay and might not negotiate with you. The flip side is they might come in lower than what you were expecting, which is a short time benefit for you but helps them in the long term.

The fourth step is the official agreement with the creditor. You need to be prepared for them to ask you for a payment then and there unless you recently paid on a bill. They might also ask for automatic withdrawals from your bank account; if you have no other choice go for it.

It’s always in your best interest to be proactive when it comes to things like this. Not only does is show initiative, but it lessens the time you’re worrying about whether or not you can pay all of your bills. There’s nothing better than peace of mind when it comes to money issues.