When you are having a tough time reducing your debt or are in sort of a cash flow crunch, one of the things you should do is to prioritize the bills you pay. I have listed various bills below according to how important they are.

Must Pay Bills

1. Mortgage or Rent (HELOC) – If you do not pay your mortgage, you risk foreclosure. If you do not pay your rent, you risk eviction. If you cannot afford your mortgage, consider selling your house and move to a less expensive house.

2. Medical Insurance – You risk incurring a disastrous medical bill if you do not have insurance. You have to pay this bill. There are ways to save on medical bills. Examples iinclude having higher deductibles, HSA accounts etc.

3. Child Support – You can end up in jail for not paying your child support.

4. Income Tax – Better pay this one. You risk wage garnishment and potential loss of any tax refund by the IRS.

5. Court Judgement – You risk wage garnishment.

6. Student Loans – The consequences are the same as not paying income tax – wage garnishment and loss of tax refund. By the way, student loans are almost never wiped out even if you file for bankruptcy.

7. Secured Loans (especially on property – like HELOC) – You risk losing your property to repossession. For business owners, it is the same as a loan that is backed by your equipment.

Bills that will hurt your credit score but are not disastrous if you do not pay

1. Credit Card Bills – Well, your score takes a hit, but you will never lose your house or go to court! In fact, if it is your first time with a late payment and you call the company, you may not even have that reported to the credit bureaus.

2. Medical Bills – You might get collection agencies hounding you, but you will certainly not end up in the streets.

3. Legal Bills – Same as medical bills.

Personal Loans – Ditto. Credit score takes a hit. Your banker friend will not be your friend anymore.

Loans from your friends, family members, relatives etc – Well, they are hopefully the most understanding of the lot.

This entry was posted on Sunday, March 25th, 2007 at 00:48 and is filed under Credit Card Tips. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.