Money & Debt

There are many reasons a household may have trouble paying bills. These include:

• Not knowing about a bill,
• Trouble tracking due dates,
• Not having enough money when the bill is due,
• Different bills needing different payment methods,
• Having to choose between limited expenses, and
• Carrying debt from earlier periods.

Households may try more than one system to manage bills and track due dates. Identifying the specific reasons bills are late or unpaid helps match available resources to the situation.

A debt is money a person or company owes to another. The obligation usually comes from an agreement, such as a loan, credit card, lease, or service contract.

A debt may include:

• The amount borrowed or charged,
• Interest or fees added over time, and
• Terms for when and how payment must be made.

A bill becomes a debt when payment is not made as required. For example:

• A current utility bill is a request for payment,
• A past-due utility bill is a debt owed to the company, and
• Ongoing charges can become debt if they remain unpaid.

Knowing whether a bill is current or past due helps explain when collection activity may begin.

Being liable for a debt means having a legal duty A legal obligation to do something to repay it. A creditor Someone who is owed money can use legal processes to collect from a person who is liable.

If a person is liable and does not pay:

• For consumer debt, a creditor may file a lawsuit. A judge may decide whether the debt is owed and may allow collection from wages, The amount of money that a person is paid for work they do bank accounts, or property.
• For other types of debt, such as unpaid income taxes, the government may place liens or levy property.

Do not rely on a debt collector A person or company that regularly collects debts owed to another person to decide whether someone is responsible for paying a debt. Figure out who agreed to the debt before making a payment. 

In most cases, only the people who agreed to a debt are legally responsible for paying it. However, debt collectors may still try to collect from other people, even if those people are not legally liable. 

No, most debts do not pass to family members upon a person's death. A person who helped someone pay bills during their life is not usually responsible for those debts after the person dies. The person legally responsible for managing the deceased person’s estate, All of the property a person owns at their death called an executor Person in charge of giving out the property left in a will or administrator, may pay the deceased’s debts with money or property from the estate. 

After the death of a spouse, a surviving spouse may be responsible for certain family expenses incurred by the deceased spouse. These rules come from the Illinois Family Expense Act. They only apply to people who were legally married.

Family expenses where a surviving spouse may be responsible for the debt include:

• Medical bills,
• Funeral expenses,
• Clothing or jewelry,
• Rent for the family home,
• Carpeting for the family home, and
• Child care.

This rule usually does not apply to money loans. It also usually does not apply to credit card debt.

The main risk of talking with creditors and debt collectors is agreeing to pay money that is not legally owed or no longer collectible. Learn more about Debt collection, including how to respond to debt collectors.

Communication with creditors or debt collectors can happen at different stages of a debt.  For active accounts, communication does not change the legal status of the debt. Creditors may offer payment plans or hardship programs.

For older debts, different rules may apply. Communication about older debt may lead to the collection of money that would otherwise be uncollectible. Some debts become legally unenforceable after a certain time. This means:

• A creditor Someone who is owed money cannot successfully sue to collect the debt unless the time period is restarted, and
• A new payment or a new agreement on an old debt may restart the time period.

In Illinois, time limits depend on the type of debt:

• Credit card debt, about 5 years after the last payment, and
• Most written contracts, about 10 years after the last payment.

Learn more about old debt from the Consumer Financial Protection Bureau.

No, consumer debt collectors cannot access all of a person’s money. 

Some types of income are legally protected from most debt collection. These are often called exempt funds. Examples include Social Security benefits, disability A substantial impairment that functionally limits a person in carrying out major life activities, such as walking, lifting, seeing, or learning. benefits, and certain retirement savings.

Creditors usually cannot take these funds to pay a consumer debt. Keeping exempt funds in a separate bank account may help maintain their protected status.

Charging off a debt is an accounting move that a creditor Someone who is owed money makes. It shifts the debt in their financial records from the list of accounts receivable (money they expect to collect) to bad debt (money they do not expect to receive). This may have advantages for the company.

Charging off a debt does not change the debtor’s A person who owes money to someone else responsibility to pay the debt. The debtor is still liable for the debt.

People can prioritize debts and bills by focusing on the risks of not paying.

• Highest-priority debts and bills carry the risk of quickly losing money, property, housing, transportation, or freedom if they go unpaid.
• High-priority debts and bills can threaten access to money, property, or housing, but people usually have more time to address them before serious consequences occur.
• Lower-priority debts and bills generally have fewer immediate consequences if payment is delayed.

Prioritizing debts is separate from deciding whether to pay them. Sometimes the best option for a high-priority bill is to set up a payment plan, apply for financial assistance, or reduce expenses.

The highest-priority debts and bills for most people carry risks of quickly losing housing, transportation, income, property, or freedom if they go unpaid.

Highest-priority debts may include:

• Civil court A court where people or businesses bring problems in front of a judge. Civil courts are different from criminal courts, where a defendant is accused of a crime by the state. judgment An official decision by a court that ends the dispute between parties debt: A creditor Someone who is owed money may use a judgment to seize wages, The amount of money that a person is paid for work they do bank accounts, or property.
• Criminal justice debt: Non-payment may lead to losing a driver’s license, property, or even freedom.
• Child support Money paid by a parent to help another parent support a minor child or an adult child with a disability or spousal support debt: Failure to pay can lead to strong enforcement actions, including wage withholding A legal procedure that allows deductions to be made from wages or income on a regular schedule. The deductions are used to pay a debt, like child support. or property seizure.
• Rent payments: Non-payment can result in eviction. A court case brought by a landlord to get a tenant to move out Learn about Dealing with unpaid rent.
• Utility bills: Unpaid bills can result in the loss of essential services, such as electricity or water.
• Automobile loans or leases: Missed payments may allow the creditor to repossess the vehicle.

High-priority debts and bills can threaten access to money or property if left unresolved. However, people usually have more time to address these issues before serious consequences occur than with the highest-priority debts.

High-priority debts include:

• Federal student loans: After about nine months of non-payment, the federal government may collect the debt by taking tax refunds, wages, The amount of money that a person is paid for work they do or certain federal payments.
• Taxes owed to the IRS: The IRS has authority to collect unpaid taxes by seizing bank accounts, income, or property. Learn more about Paying income taxes.
• Home mortgage A loan given by a bank that is used to help someone buy a home delinquencies: A few missed payments can lead to a foreclosure A forced sale of property when a person doesn't make payments on a loan lawsuit, which may result in the home being sold to pay off the loan and the people living there being evicted.
• Unpaid real estate Property consisting of land or buildings like a house or an apartment taxes: The tax debt may be sold in a tax sale. Unless the taxes are redeemed, the tax buyer may eventually obtain ownership of the property and evict the people living there. Learn about Unpaid property taxes.

Lower-priority debts and bills are less likely to result in immediate loss of property, income, or housing. In many cases, a creditor Someone who is owed money must first file a lawsuit and obtain a court judgment An official decision by a court that ends the dispute between parties before collecting money or property.

Debts that usually require a lawsuit before wages, The amount of money that a person is paid for work they do bank accounts, or other property can be taken include:

• Medical debt,
• Credit card debt,
• Remaining debt after a car repossession,
• Installment or personal loans, and
• Debt owed to friends or relatives.

Private student loans are different from federal student loans because private lenders do not have the government’s special collection powers.

Small loans secured by household goods are also less urgent. Creditors rarely seize low-value household items.

A debt repayment plan organizes how available money is used to pay debts over time. Developing a plan may include:

• Prioritizing debts,
• Figuring out what resources are at risk of collection, and
• Negotiating with creditors.

Some creditors have stronger collection powers than others. If a debt is not paid, a creditor Someone who is owed money or government agency may take legal action. A court may enter a judgment, An official decision by a court that ends the dispute between parties which can allow collection from wages, The amount of money that a person is paid for work they do bank accounts, or property. Some government debts may be collected without a court case.

Choosing a repayment method depends on:

• Matching resources and expenses realistically, and
• Picking an approach that motivates the debtor A person who owes money to someone else to follow through.

Two common approaches to paying off consumer debt are the avalanche and snowball methods. These focus on how payments are applied:

• The “avalanche” method applies extra amounts to the debt with the highest interest rate The amount charged for borrowing money while minimum payments are made on other debts, and
• The “snowball” method applies extra amounts to the debt with the smallest balance while minimum payments are made on other debts.

These methods are often used for unsecured debts such as credit cards. They do not change the legal obligations tied to the debt.

Other arrangements may include:

• Balance transfers with low or 0% interest for a limited time, which may include fees and retroactive interest if terms are not met, and
• Payment plans or hardship programs offered by creditors.

Many credit counseling agencies are non-profit organizations. These providers may be accredited by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA).

Nonprofit agencies may provide:

• Help creating a budget,
• Information about debts and payment options, and
• Help communicating with creditors.

These services are different from for-profit debt settlement companies that charge fees to negotiate debts.

Before working with a service, check:

• Accreditation through NFCC or FCAA,
• Complaint A written statement to start a lawsuit that says what the defendant did history with the Better Business Bureau, and
• Registration with the Illinois Secretary of State and Department of Financial and Professional Regulation. 

Learn more from the Consumer Financial Protection Bureau and the Federal Trade Commission about choosing a credit counselor.

Many companies and law firms advertise debt settlement or credit repair services. These services often involve steps that can be done without paying a company.

Be cautious with these services because:

• Some creditors refuse to work with debt settlement companies,
• People can communicate directly with creditors and debt collectors, and
• Companies may charge fees for services that can be completed without them.

Illinois law limits how debt settlement companies can charge consumers. Do not agree to pay more than these amounts.

A debt settlement provider:

• Cannot charge upfront fees, except a one-time fee of $50 or less,
• Cannot charge more than 15% of the amount saved,
• Cannot collect a fee if the settlement amount is more than the original debt, and
• Cannot collect a fee until a legally enforceable agreement is reached with the creditor. Someone who is owed money

These rules are in section 125 of the Debt Settlement Consumer Protection Act.

Payday loans, title loans, and similar financial products often target people who are in financial distress. They are often called predatory loans because they:

• Charge very high interest rates and fees, and
• Trap borrowers in a cycle of debt.

Some predatory loans promise fast cash, no credit checks, or approval within minutes. These offers may hide very high interest rates or fees. Be careful if a product:

• Promises instant access to cash before payday,
• Charges fees to get money faster,
• Asks for continuous access to a bank account, or
• Encourages repeated borrowing or refinancing.

Yes, the Illinois Predatory Loan Prevention Act limits interest rates on many consumer loans to 36% APR, including certain fees. However, some lenders try to structure loans to avoid this cap. Do not assume that a loan being offered follows the law or is safe.

Before agreeing to a loan, review the total cost, including interest and fees. Alternatives to a high-interest loan may include:

• Asking a creditor Someone who is owed money about a payment plan or hardship program,
• Borrowing from a credit union,
• Using a lower-interest credit card, or
• Seeking assistance from local charities or community organizations.

Use Get Legal Help to find free and low-cost legal support. Visit Debt Help Illinois for more information on managing debt.

Local libraries may also offer free access to useful books, audiobooks, and other resources for financial wellness. Look for information about organizing bills, tracking deadlines, and managing payments.