When your budget is tight, and you do not know what bill to pay first, consider the following suggested priorities. Please keep in mind that some expenses look like one type of bill, when they are actually another category. Student loans and back taxes are in reality �secured debts� and should be paid before unsecured debts. Utilities which have been disconnected, and debts secured by household goods appear to be �secured� debts, but should be included in the unsecured category.
FIRST PRIORITY: HOUSING -including rent, mortgage payments, real estate taxes, condominium and lot fees.
SECOND PRIORITY: FOOD - since this is a necessity for life, basic groceries and household items should rank high on your list of priorities.
THIRD PRIORITY: UTILITIES - without electricity, water, sewer, and telephone your standard of living would be unbearable, so keep this category near the top of your list.
FOURTH PRIORITY: SECURED DEBT - vehicle payments, student loans, tax liens, child support should be next in line for payment. A default in any of these payments can cause serious problems in your life such as car repossession, garnishment of income tax refunds savings and checking accounts, and even jail time for missed child support.
FIFTH PRIORITY: UNSECURED DEBT - This category is comprised of credit cards, medical bills, lines of credit, personal loans, and other items not secured or subject to legal attachments.
Remember that the bill collector with the loudest bark is often the one
that is to be least feared. Threats
about your credit rating should never affect the priorities of bill paying.
�Good faith� payments go a long way, even if the creditor maintains that
they will not accept partial payments.
Call ACCS at 1-800-729-0551 for help!
NOW WHAT? WHO DO I PAY FIRST?
One of the most frustrating aspects of credit counseling is to meet with a client who came to us after they got so deep in the mire of credit problems that they were about to lose their home to a foreclosure or their car to a repo agent. If nothing else is learned, it is a necessity to learn that your resources must be used first to provide food, housing, utility service and transportation for you and your family.
Since everyone is faced with a different situation, there is no list of priorities that applies to everyone in exactly the same way, However, here are some suggestions about how to set your own priorities in determining which debts to pay first.
1. Family necessities such as food and medical attention must be first. Food costs can be minimized by using programs such as SHARE, by planning your menu around the store specials for the week, and by using manufacturer and store coupons.
2. Housing related bills such as rent or mortgage payments, real estate taxes and insurance should be next on your list. And don�t forget homeowner�s or condo fees. If you don�t pay any of these necessary items, you may lose your home.
3. Utility services such as electric, oil, water and sewer should be your next priorities. It doesn�t make much sense to live in a home that is not livable because the utilities are turned off.
4. Car payments (lease or loan) should be next on your list if your need the vehicle to get to work. And don�t forget to keep up on car insurance payments or the lender may buy insurance for you and add it to your payment. If you have two car payments, try to figure out how you can do away with one car. You will not only save the extra payment, but the insurance, repairs, maintenance, and gas on the second car.
5. Child support is usually Court ordered, and must be paid or you may face time in prison. Sometimes, if circumstances warrant it, you can go back to the Court to get the payments reduced.
6. Don�t forget the IRS. Income tax payments must also be a high priority since the government has many rights that other creditors do not have. You may find it advisable to reduce the amount of deductions from your paycheck, so your weekly cash flow is larger. This will reduce the amount you get back at tax time, but will give you more to live on each week.
Student loans are a medium priority debt and they should be paid ahead of
low priority debts but after high priority debts. The U.S. Government backs
most delinquent student loans. Federal law provides collection remedies that are
not available to other creditors, such as seizure of your tax refunds, and
denying new student loans and grants. Best remedy is to be pro-active and
contact the originator of the loan, before you get too far behind, to work out a
payment plan that fits in your budget..
8. Court judgments against you may move up in priority, but not always. Do not ignore a summons to appear in court. Always appear to defend yourself and tell your side of the story to the judge. This is a good time to seek professional advice, to determine if your property is subject to seizure and if so, how much Once a collector gets a judgment against you, the creditor can enforce the judgment by asking the Court to seize certain of your property, wages and bank accounts.. Once again, this procedure takes several months.
Do not let creditor�s threats
make you move up the priority of their payment. Most of the time, creditors
bark is much worse than their bite. Threats of lawsuits for unsecured debts are
many times not carried out, and even if they are, it takes many months to get on
the Court docket. However, non-payment of rent, mortgage payments and car
payments can cause you to lose your home or car.
10. Loans without collateral or with household goods as collateral should be a low priority. Most credit cards, attorney, doctor and hospital bills, merchant accounts, and charged off accounts can wait until times get better for you. Even those accounts with household goods as collateral will not generally want the collateral back, so they will not, in all likelihood, seize the items without a Court order.