Falling behind on debt payments can be the result of job loss, excessive medical expenses, economic downturn or a variety of other issues. Once behind, making a decision on how to prioritize outstanding debt payments can be a confusing and complicated matter. While some debts can wait, others need immediate attention and payment.
Government Debt
Debt obligations related to tax liens, unpaid taxes, student loans or other types of government-related debt should be high on the priority list for repayment. Government agencies such as the Internal Revenue Service have vast resources to utilize in securing repayment of debt. In some cases, this can extend to garnishment of your income, liens on your home or business or even loss of property. At a minimum, partial payment of these debts should be included in debt repayment management to demonstrate a willingness to pay and possibly avoid legal action.
Living Expense Debt
Debt related to monthly living expenses should be given high priority in any debt repayment plan. Preserving your place of residence, medical or health insurance and utility bills will maintain your ability to work and keep a steady stream of income to pay debts. If necessary, consider selling your home or renting a less expensive apartment to reduce living expense debt.
High Interest Debt
High interest debt, such retail store credit cards or credit cards charging a high default interest rate, should be addressed to avoid continuing interest,penalties or over-limit fees. Not only can poor repayment of these debts harm your credit, the addition of late fees and compounded interest can quickly increase your debt obligation.
Court-Related Debt
Any court-related debt must be given high priority in your overall repayment plan. Late or nonpayment of debt such as child support, alimony, traffic fines or court fees can result in the loss of driving privileges, additional penalties or even arrest. In many cases, the court will work with delinquent debtors in an effort to recover money owed to the court and avoid further action.
Auto Loans
While repayment of an auto loan may not seem as important as other debts, it should also be considered an important obligation. Losing access to personal transportation may result in an inability to continue working or searching for a new job. Utilizing public or private transportation may also add to your overall debt issues.
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