Managing the bills during hard times
Hard Times call for Smart Decisions
Everyone who tries to juggle a home and family is aware of the pressures that are faced on a daily basis, therefore when money is tight, wise financial decisions are more important than ever. Providing necessities for your family is your top priority. All other bills are of lesser importance, regardless of what a creditor or debt collector may say. These 16 rules will help you prioritise your bills and expenses.
Start with the essentials
Pay family necessities first.
Paying for food and essential medical expenses should be your first priority.
Pay housing-related bills.
Keep up your mortgage or rent payments, if possible. If you own your home, real estate taxes and insurance must be paid. (They may be included in the monthly mortgage payment) . Failure to pay these debts could lead to loss of your home.
Keep utilities on.
Make necessary utility payments next if possible. Working hard to keep your house or apartment makes little sense if it is not livable because you have no utilities.
Pay a car loan or lease.
If you need your car to get to work or for other essential transportation, rank your car payment just below food, medical expenses, housing costs and utilities on your priority list. You may want to make your car payment first, if your car is essential to holding onto your job. Stay current on your insurance payments as well. If you don’t, your creditor may buy insurance for you at your expense.
Pay child support.
Child support debts will not go away. Fail to pay and very serious consequences may result, including prison.
Identify your low-priority obligations
An unsecured debt is a low priority.
Most credit card debts, attorney, doctor and hospital bills and other debts to professionals, open accounts with merchants and similar debts are low priorities. You have not pledged any collateral for these loans, and there is rarely anything that these creditors can do to hurt you in the short term. Many won’t bother to try to collect in the long term.
A loan with household goods as collateral is a low priority.
Sometimes a creditor requires you to put some of your household goods up as collateral on a loan. Treat this debt as a low priority. Creditors rarely seize household goods because they have little market value, it is hard to take them without court process, and using the courts is time-consuming and expensive.
Don’t move a debt up in priority if a creditor threatens to sue.
Many threats to sue are not carried out. Even if the creditor does sue, it will take a while for the collector to be able to reach your property, and much of your property may be exempt from seizure. On the other hand, non-payment of rent, mortgage and car debts may result in immediate loss of your home or car.
Don’t pay when you have a good, legal defence.
If the goods purchased were defective or a creditor is asking for more money than they’re entitled, you may have a legal defence for not paying your bill. You should obtain legal advice to determine whether your defence will succeed. In evaluating these options, remember that it is especially dangerous to withhold mortgage or rent payments without legal advice.
A student loan is a medium priority debt.
Student loan debts should be paid ahead of low priority debts, but after top priority debts.
Dealing with courts and debt collectors
A court judgment boosts a debt’s priority
After a collector obtains a court judgment, that debt often should move up in priority because the creditor can enforce that judgment by asking the court to seize your property, wages and bank accounts. Nevertheless, how serious a threat this really is will depend on the specific law, the value of your property and your income. Obtain professional legal advice if you have not done so already.
Debt collection efforts should not boost a debt’s priority.
Be polite to the collector, but make your own choices about which debts to pay based on what is best for your family. Debt collectors are unlikely to give you good advice. They’ll urge you to pay debts that you should actually pay last.
Treat cosigned debts as your own.
If you have put your home or car as collateral on a co-signed loan, paying this debt should be a high priority debt when the other cosigners fail to pay. If you have not put up collateral, treat a cosigned debt as a lower priority. If someone has cosigned a loan for you and you are unable to pay the debt, you should tell your cosigner about your financial problems, so that he or she can decide what to do about that debt.
Refinancing is rarely the answer.
If you’re having serious money woes, you’ll want to be careful about refinancing. Refinancing a loan can be very expensive, and it can give creditors more opportunities to seize your important assets. A short-term fix could lead to long-term problems.
