Debt Reduction Advice | Debt Reduction Advice

Homeowners struggling to prevent foreclosure often have to make difficult and almost impossible financial decisions at times. When unemployment strikes and benefits are just a fraction of the working income, bill juggling is common.

When it is necessary to cut back on expenses some bills can be eliminated or reduced. But there are also expenses that are necessary in order to live a decent life. They include the mortgage payment, food expenses, and utilities charges. Middle and low income families are forced to decide which bills will be paid on a reduced income. In many cases, the bills are rotated with a bill being paid every other month.

Unfortunately there are many situations coming to light where bills are not paid at all, and they include utilities bills. When faced with a choice of paying the mortgage payment and buying food or paying utility bills, the utility bills are moved to the bottom of the pile. As a result there are tens of thousands of Americans having their utilities cut off by the utility companies.

The cost of heating a home with oil has doubled since the year 2000. The cost of heating a home with electricity has risen by 33%. The increases in utility charges has outpaced income increases in many households, so when unemployment strikes, the situation becomes dire. In fact there are consumers being forced into foreclosure because they cannot pay their utility bill and the mortgage payment. To give you an idea of the extent of the problem, 31,000 homes had their utilities shut off in 2009 in Rhode Island alone.

The federal government offers energy assistance grants but for many the grants do not cover nearly enough of the utility charges. In 2009 there were 8.1 million families who received $500 grants. But $500 does not even cover one month of utility charges in many cases. Many states have protectionist laws in place that forbid utility companies from turning off the utilities during the winter months. For some households that is the only reason they still have heat.

Once the utility has been shut off, it is costly to get it restored. Most utility companies will charge penalty and interest and require a percentage of the overdue amount to be paid. Arrangements can be made for monthly payments to pay off arrears charges, but often the monthly amount required is not affordable.

Though the one-time grants are appreciated, they simply do not provide enough assistance. In New Jersey, utility assistance is linked to the family income level. Many other states are considering this type of program which will raise the number and amount of subsidies to low and middle income families by quite a bit. Subsidies can come in the form of ongoing grants or reduced charges based on income level.

States that already have income linked plans in place include New Hampshire, Indiana, Ohio, Pennsylvania, New Jersey, and Nevada. The utility companies in states considering such income-linked utility assistance plans are concerned the plans will force them to raise rates so high that consumers not on the subsidy or reduced charges plans would be unfairly burdened.

Any consumer unable to pay their utility bills should not ignore the monthly bills. It is important to contact the utility company and your local government to find out what assistance options are available in the resident state.