When faced with unemployment or other financial challenges, Tennessee consumers may be unable to pay all their bills on time. This means they are forced to choose which debts are most important and which can wait. However, once a debt becomes 30 days late, consumers may be faced with harassing phone calls from creditors. They may also face foreclosure on their home or repossession of their car. With so many debts, which ones do you pay first?
Because your credit cards may carry the highest interest rates, you may be tempted to pay them first before anything else. While this may seem like a good idea in theory, you likely have more important debts to deal with first. Start with your utilities, since you need water and electricity to survive. A phone and Internet connection may also be priorities if you work from home. Then move on to the secured debts, such as your house and car. These are things that can be taken away by the bank if the payments are not made, so make every effort to pay at least the minimum payment on these debts.
If you have legal obligations, such as tax payments or child support, these should be next on your list. Contact these agencies if you need help making payments. They will likely work with you. Do not ignore these obligations entirely or you could face fines or even jail time.
Next comes the credit card debt. If you have multiple cards, work toward paying off the one with the highest interest first, then move on to the next one. If you have decent credit, you may want to consider a debt consolidation loan. These often have lower rates than credit cards and allow you to pay off your cards while paying just one monthly payment rather than several. If you have student loans, those should be next on your list after your credit cards have been paid off.
It can be overwhelming when your debts outweigh your income. If you still have trouble keeping your debt down, you may want to consider bankruptcy. Discuss the pros and cons with an experienced bankruptcy attorney.
Source: FindLaw, “Which Debt to Pay Off First,” accessed Dec. 28, 2014