Sometimes bills come due when we can least afford to pay them. Month after month, the cash we have available is not enough to pay all the debts that are due and payable. Chronic shortfalls like this can cause anxiety, fear, depression, despair and feelings of powerlessness. What is the responsible thing to do in this situation? Here are some suggestions to consider as you seek to make the best possible choices when you cannot keep current on your debts.
- Always pay family necessities first. That includes food and unavoidable medical expenses if the professional provider requires pre-payments.
- Stop paying mortgage debt or rent if you know you are going to move. Put this money aside to pay for moving expenses.
- Pay only the minimums required to maintain essential utility services.
- Continue making car loan or lease payments if you need a car to get to work.
- Child support payments come next in your list of priorities.
- Next up, pay income taxes because they are likely to be non-dischargeable if you later must file for bankruptcy protection. Remember to file your tax return even if you cannot afford to pay any income tax due.
- Loans secured by collateral that you want to keep (like your house or car) are higher in priority than debts that are not backed by collateral. Creditors without collateral cannot do anything to you in the short-term.
- Loans secured by household goods should be given lower priority because most lenders will not go after collateral of this type.
- Under no circumstances agree to give a lender collateral — don’t make an unsecured claim into a secured claim just because the creditor threatens a lawsuit.
- Find out if you have valid legal defenses to repayment of claims asserted against you.
- Court judgments move debts higher on the priority scale, but these claims only become a bigger headache for you if and when the creditor begins garnishing your wages.
- Government student loans are medium scale priority; pay them if you have money left over after paying higher priority debts. Do not pay lower priority debts at the expense of making payments on higher priority debt like student loans.
- Threats to ruin you credit should never cause you to move up a debt’s priority.
Following this ladder of priorities may be sufficient to enable you to get back on your feet without too much disruption. If, on the other hand, difficult financial circumstances persist, it may be time to consider other, more potent, options.
If you are overwhelmed by debt and would like to get a sense of your various options, contact us at your convenience for a free consultation. We can usually sketch out the alternatives in 30 minutes or less, but we don’t set a timer and stop when an imaginary buzzer goes off.
ATTORNEY ADVERTISING — PAST RESULTS DO NOT GUARANTEE FUTURE OUTCOMES
We are a debt relief agency, we help people file for Bankruptcy under the Bankruptcy Code. This Blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney-client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.