Prioritizing Debt
If you are having serious debt problems, you are probably having trouble keeping all of your debts up to date. You can only reduce some expenses, and available income can only be stretched so far.
This leaves you with no choice but to delay or not pay some debts. Once you determine that you can't afford to pay all of your debts as they come due, you will have to make some hard choices as to which bills you should pay first. Your home or apartment, your utilities, your car, and even your household possessions may be at risk.
Following the rules in this chapter may make the difference between keeping or losing important property.
Do Not Take On More Debt To Pay Off Old Debt.
A short-term fix can lead to long-term problems.
It is tempting to take on more debt to pay off old debts instead of delaying or getting rid of certain debt repayments. Usually this is the wrong choice. Deciding when you should and shouldn't take on new loans is discussed in a later article.
The main thing to do with too much debt is to decide which debts should be paid first, which you can refuse to pay, and which you can delay for a period of time.
The creditor who makes the most noise most often is not necessarily the creditor you should pay back the first. Many times these creditors make as much noise as possible to intimidate you since they have no other way to reclaim their money.
The creditors to be the most concerned about are those who quickly take action against your home, car, utility service or any other vital assets you may have.
Pay off creditors who can take the quickest action to hurt you, not those who yell the loudest and call the most often.
You should direct your limited resources to what is most necessary for your family -- typically food, clothing, shelter, and utility service.
Since there is no 'wonder list' which gives the specific order in which debts should be paid, you should use this article as a general reference guide and make more decisions based on this information and your particular circumstances.
Debts with collateral are top priorities.
There is one particularly important concept you should keep in mind while you are deciding which debts to pay first and which you may need to let go. This is the concept of "collateral."
Collateral is physical property that a creditor has the right to seize should you default on your payments to them. Usually collateral takes the form of your home (mortgage) and your car when you take out a car loan.
A creditor may also have collateral in your household goods, business property, bank account, or even wages. Collateral can take many forms. When a creditor has taken collateral for your loan, it has a "lien" on your property.
Determine which of your debts are 'secured' and which are 'unsecured'.
In nearly every case you should pay secured debts first. 'Secured creditors' are creditors who have collateral. They know that if you don't pay them back they can take the collateral from you and auction it off to try and recover their money.
Creditors without collateral are often referred to as "unsecured." It is usually hard for unsecured creditors to collect what they are owed unless you pay voluntarily.
The idea that debts with collateral are the most critical may seem very simple. Unfortunately, it is difficult to keep this simple concept in mind when you are getting hassled by debt collectors trying to force you to pay your lowest priority debts.
It is extremely important to remember this concept as you make decisions about your financial future. - 16003
If you are having serious debt problems, you are probably having trouble keeping all of your debts up to date. You can only reduce some expenses, and available income can only be stretched so far.
This leaves you with no choice but to delay or not pay some debts. Once you determine that you can't afford to pay all of your debts as they come due, you will have to make some hard choices as to which bills you should pay first. Your home or apartment, your utilities, your car, and even your household possessions may be at risk.
Following the rules in this chapter may make the difference between keeping or losing important property.
Do Not Take On More Debt To Pay Off Old Debt.
A short-term fix can lead to long-term problems.
It is tempting to take on more debt to pay off old debts instead of delaying or getting rid of certain debt repayments. Usually this is the wrong choice. Deciding when you should and shouldn't take on new loans is discussed in a later article.
The main thing to do with too much debt is to decide which debts should be paid first, which you can refuse to pay, and which you can delay for a period of time.
The creditor who makes the most noise most often is not necessarily the creditor you should pay back the first. Many times these creditors make as much noise as possible to intimidate you since they have no other way to reclaim their money.
The creditors to be the most concerned about are those who quickly take action against your home, car, utility service or any other vital assets you may have.
Pay off creditors who can take the quickest action to hurt you, not those who yell the loudest and call the most often.
You should direct your limited resources to what is most necessary for your family -- typically food, clothing, shelter, and utility service.
Since there is no 'wonder list' which gives the specific order in which debts should be paid, you should use this article as a general reference guide and make more decisions based on this information and your particular circumstances.
Debts with collateral are top priorities.
There is one particularly important concept you should keep in mind while you are deciding which debts to pay first and which you may need to let go. This is the concept of "collateral."
Collateral is physical property that a creditor has the right to seize should you default on your payments to them. Usually collateral takes the form of your home (mortgage) and your car when you take out a car loan.
A creditor may also have collateral in your household goods, business property, bank account, or even wages. Collateral can take many forms. When a creditor has taken collateral for your loan, it has a "lien" on your property.
Determine which of your debts are 'secured' and which are 'unsecured'.
In nearly every case you should pay secured debts first. 'Secured creditors' are creditors who have collateral. They know that if you don't pay them back they can take the collateral from you and auction it off to try and recover their money.
Creditors without collateral are often referred to as "unsecured." It is usually hard for unsecured creditors to collect what they are owed unless you pay voluntarily.
The idea that debts with collateral are the most critical may seem very simple. Unfortunately, it is difficult to keep this simple concept in mind when you are getting hassled by debt collectors trying to force you to pay your lowest priority debts.
It is extremely important to remember this concept as you make decisions about your financial future. - 16003
About the Author:
Ian is someone who has come through a very difficult time financially. He used credit debt consolidation to ease his situation markedly. Without good debt consolidation advice he would have certainly gone bankrupt.
