Prioritizing Debt Payments
Being indebted is always considered an unhappy and liable condition
, in spite of the presence of various debt relief options like Debt settlement, debt consolidation, credit counseling, debt management etc. Thus, the debtor has to have proper knowledge about the nature of debt that he/she is into. One has to keep in mind the fact that not all debts are created equal; some should be given more priority than the others, whereas some debts can be dealt according to ones convenient affordability. One might sometimes face trouble in paying one sort of debt to another and in that case, one first has to understand the importance of the particular debt and take time to prioritize the debt payment, accordingly. Start with making a list of your total debts, and then differentiate them as essential and non-essential. Read the following to know about the essential and non-essential debts:
1. Essential Debts: These are the debts that one should give the topmost priority of payment, as ignoring the payment of an essential debt might lead to threatening consequences and serious complications. Thus these debts have to be cleared up to start with the process of payment. The essential debts are:
Rent or Property Mortgage - Keep paying your house rent as long as you decide to move on to a new place of living. Likewise, paying off the debts to repossess your mortgaged property is one of the most urgent debt payments to avoid foreclosure. In case of dire financial setback, however, do not hesitate to part of your home, but do check the pros and cons before selling it to pay your other debts.
Car Loans - Losing a vehicle to debt is never recommendable, especially when you need it to keep your job, or for some other very significant requirement. But in case you can do with a less expensive car to ward off the expense, sell it for good and buy a cheaper car.
Utility Bills - Practically speaking, one should not be indifferent towards the bills that pay for the gas, heating, electricity, phone, water etc, and should thus make these a priority.
Child Support - It is one of those unavoidable debts, the payment failure of which can land one in legal hassles, unless the debtor convinces the court of his inability to pay.
Unpaid Tax - One should immediately sort out a repayment plan with the officials of IRS, as the same has the right to claim your paycheck or property and even vehicle, on failure to pay proper tax from your end.
2. Non-Essential Debts: These comprise those debts, the non-payment of which will not incur any devastating effects on ones life, but paying the debt off will surely be desirable, as ignoring these may hamper the credit report for 7 long years. However, these debts are not needed to be put on the priority list, and can be paid off accordingly with apt time and money. The following are the non-essential debts:
Loans from friends and relatives In spite of having a moral obligation towards the payments of these debts, one can still wait to pay for these outstanding.
Newspapers and magazine subscriptions These bills are definitely non-essential but can be associated to collection actions.
Department store and gasoline charges One might lose his/her credit privileges on failure of this payment and in rare cases one might get sued.
Legal and accounting bills Payment towards these bills can be delayed but should not be avoided completely.
Remember to first get rid of your essential debts and deal with your non-essential ones later in accordance with your convenience, as ignorance towards the former might lead you to inescapable legal hassles and complications.
Authors Bio: Shirley Diaz is a Journalist who writes on various debt settlement and bankruptcy related topics for different websites.
by: Stella Dennis
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