Debt Relief

Debt relief : prioritizing debts

If you're serious about debt relief and your financial problems are mounting you need to make an assessment of each debt and begin to prioritize which are the most important to pay off. If you think about it it's quite simple: the consequences of failing to pay off some debts are much more serious than others.

Make sure you've got a roof over your head

Unless you're confident you have another place to live, rent or mortgage repayments are the most important debt to pay; if you own your own home you could consider getting a home equity loan (second mortgage) but failing to pay off this added debt could result in your house being repossessed.

Food and light

Paying off utility bills should also hit the top of your list. Having your electricity or heat cut off will leave you feeling ashamed and miserable. Dealing with debt is difficult enough, having picnic dinners, children complaining of cold and candle light will do nothing for your self-esteem or your reputation.

Car loans

If you need your car to get to work don't risk losing it to the repo man. Pay off this debt as a priority. If you can take the bus instead or have a second car consider getting rid of yours. If you're in financial difficulty debt relief must be your main concern. Make auto insurance a priority too, driving without it is illegal and you run the risk of being landed with enormous repair or medical bills should you have an accident.

Medical bills

Paying off medical bills is essential if you are in need of ongoing medical care.

Unpaid taxes

The IRS has the power to seize your paycheck, repossess your house or take control of your bank account. If you're so far behind in your taxes that they threaten to do so, get moving on that bill.

Child support

If you're legally bound to pay child support then make sure you do. Not only will your children suffer without the payments but you could end up in court or in jail.

Secured loans

Any other loans that are secured against your property should probably come next. In most states the creditor can repossess your goods to pay off the debt without getting a court judgment. If the item is essential - such as a fridge or stove - you'll need to keep up the payments; if it's that ten-person spa bath sitting in the back yard, put it at the bottom of your list. Make debt relief a reality by making a few well-considered sacrifices.

Interest Rates

For non-essential debts pay off those with the highest interest rate first. If you've got more than one credit card go for the one with the highest charges. Store cards and gasoline cards should be treated the same way. If you can't pay your bill you damage your credit score but don't ruin your life.

Unsecured loans

Unsecured loans are not tied to any property and therefore are only essential in the case that the creditor has already sued you and obtained a court judgment to collect payment through other means. Pay other bills first if this is not the case.

Informal loans

If friends or family have loaned you money you may feel you should pay them back but make essential items a priority: anyone willing to loan you money in the first place will understand.

Stay focused on your debt relief plan even when under pressure. Always pay essential debts first even if the collectors for non-essential debts are shouting loudest.