Salvaging Finances and Prioritizing Debts

If a person or family has suffered an unexpected and, probably, a short- term loss of income, as for example, the loss of employment that is not expected to last a very long time, or a sudden and unexpected financial burden, it is necessary to prioritize debts into "essential" and "non-essential" categories. This is not to suggest that all bills and obligations are not valid and ultimately due, but it is important to appreciate the consequences of leaving one or some creditors unsatisfied for the short run.

(Ultimately, a debtor may have to resort to Bankruptcy protection. There are specific rules for that protection which will be discussed in a general fashion in a later article. As part of the new bankruptcy law, a debtor may be required to undertake credit counseling; if one's debts are too overwhelming, and even if you need a little help, a visit to a non-profit credit counseling agency may be helpful. The U.S. Department of Justice's Trustee site provides a list of approved agencies.)

However this article presumes that the difficulties are not so severe as to warrant bankruptcy and that a short-term approach is sufficient.

Some debts are more important than others. If you are having trouble paying bills, take the time to prioritize your debts. Make a list of debts that must be paid, without fail, and those that can wait -- and always pay the essential debts first. Do not be influenced by the frequency of bill collectors' calls; it may be possible to lessen these in any event. (In a future article, I will discuss illegal tactics by bill collectors and the laws that forbid undue harassment.)

An essential debt is one that you should put at or near the top of your list for payment. The consequences of non-payment of an essential debt can be harsh indeed.

Rent or mortgage.

Unless you know you are going to move and have a place to live, make paying your rent or mortgage the highest priority.