Financial Focus for June: Sorting out those debts

Date: June 13, 2017 | Category: News

Care Connection understands how difficult it can be to navigate through personal finances, so we have created a monthly series called “Financial Focus.” We will feature different areas of personal finance and offer tips and information that you can use. This month we focus on the different types of debts and how to choose which ones to pay first. This information comes from the National Consumer Law Center.
There are two categories of debts: secured debts and unsecured debts. Secured debts are loans in which creditors have collateral for your loan. They know that if you do not pay, they can take the collateral from you and sell it to get their money. Loans in which creditors have no collateral are often referred to as “unsecured.” It is usually hard for these creditors to collect what they are owed unless you pay voluntarily. Because of this, unsecured debt collectors are usually very forceful and tend to harass people who are unable to pay. It is important not to let debt collection harassment force you to make decisions in the moment that may hurt you later. It is important to make your own choices about which debts to pay first based on what is best for you and your family.
Here are some tips on choosing which debts to pay first: Always pay family necessities first. This usually includes food and immediate medical expenses that are required up front for service. Next pay your housing-related bills. This includes your mortgage or rent and real estate taxes and insurance. Pay the minimum required to keep essential utility service. Pay car loans or leases next if you need to keep your car, and pay on any income tax debts you may owe. Loans without collateral are low priority. Do NOT move debt up in priority because a collector threatens to sue. Many threats to sue are not carried out. If they are, it will take a while for the collector to be able to seize 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.
However you decide to prioritize your debts, be sure to make decisions that are best for you and your family. Do not let the pressure of a debt collector influence your decision. Care Connection has more information on debt collection, and are happy to share. Just call us at 1-800-748-7826 or ask our senior center staff.