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Paying your bills: Which to pay first

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 prioritize your bills and expenses.

Make sure important bills get paid
How to ensure that your most important bills get paid first during times of hardship:
Rules for prioritizing bills
1. Pay family necessities first.
2. Pay housing-related bills.
3. Keep utilities on.
4. Pay a car loan or lease.
5. Pay child support.
6. Pay income taxes.
7. An unsecured debt is a low priority.
8. A loan with household goods as collateral is a low priority.
9. Don't move a debt up in priority if a creditor threatens to sue.
10. Don't pay when you have a good, legal defense.
11. A court judgment boosts a debt's priority.
12. A student loan is a medium priority debt.
13. Debt collection efforts should not boost a debt's priority.
14. Threats to ruin your credit should not boost a debt's priority.
15. Treat co-signed debts as your own.
16. Refinancing is rarely the answer.

1. Pay family necessities first.
Paying for food and essential medical expenses should be your first priority.

2. Pay housing-related bills.
Keep up your mortgage or rent payments, if possible. If you own your home, real estate taxes and insurance must also be paid unless they are included in the monthly mortgage payment. Any condo fees or mobile home lot payments should also be considered a high priority. Failure to pay these debts could lead to loss of your home.

3. Keep utilities on.
Whatever utility payments are necessary should be made if possible. Working hard to keep your house or apartment makes little sense if it is not livable because you have no utilities.

4. 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, utilities and housing costs on your priority list. You may want to pay 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 for you at your expense more costly collision and theft coverage with less protection. In most states, it is illegal not to have automobile liability coverage.

5. Pay child support.
Child support debts will not go away. Fail to pay and very serious remedies may result, including prison.

6. Pay income taxes.
You must pay any income taxes you owe that are not automatically deducted from your wages. You must file your federal income tax return even if you cannot afford to pay any balance due. Remember, though, if you have lost income due to a change of circumstances, your tax obligations will also be reduced. Pay only what is necessary.

7. An unsecured debt is a low priority.
Consider most credit card debts, attorney, doctor and hospital bills and other debts to professionals, open accounts with merchants and similar debts 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.

8. 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 seize them without court process, and it is time consuming and expensive to use a court process to seize them.

9. 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, nonpayment of rent, mortgage and car debts may result in immediate loss of your home or car.

 
 
Next: "A court's judgment boosts a debt's equity."
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