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What Payments You Can Stop Making First


Financial security is often more precarious than we realize. From one day to the next, your low monthly payments, steady paycheck and modest emergency fund can disappear in the face of massive lay-offs, sudden illnesses, or a family crisis. Before you know it, you are buying groceries and paying the light bill out of your emergency credit card, your savings account has dwindled to nothing, and you start imagining the mailman must be some kind of magician―otherwise, how could he continue to conjure up bills for you to pay faster than you can open them? If you're reading this, chances are you can't afford to pay them all right now; if so, who can you put on hold? While you work out the answer to this one, it's important not to take advice on the matter from the wrong people. The wrong people here are the bill collectors! Each one of them is going to tell you that HIS bill is the one you CANNOT afford to stop paying. These people don't have your best interests at heart. According to them, there is no bill that you should stop paying first if you're forced to, especially not theirs. This is not true. However, it's also not true that not paying bills when you're able to is a good idea. Not at all. Obviously, this advice is appropriate for the situation that arises when you simply cannot pay for them all. If you're at the point of deciding between putting food on your table or paying an angry creditor, it's probably time to talk to a bankruptcy lawyer. Whether bankruptcy isn't right for some reason, or you're not ready quite yet, or you're ready but you're still in the initial stages, what you have to do is make a plan. Plans make for financial success, and they are even more important when you're in financial trouble. When you're wondering who you should stop paying first, ask yourself these questions: What do I stand to lose from not paying? That is, what can this creditor to do me if I don't pay him? If you're considering bankruptcy already, will that debt be discharged altogether? It doesn't make sense to keep paying something that will be discharged eventually, or to pay for those things where the consequences arrive only after the creditor obtains a court judgment against you. Credit cards bills, loans from finance companies and medical bills fit under both of these conditions; if you have to cut something, this is a good place to start. If you're getting ready to file for bankruptcy, another kind of loan you may want to hold off on paying, however painful it may be, is a personal loan or a loan that is cosigned by a family member or a friend. It's admirable to want to fulfill these commitments, but if bankruptcy is in your near future, the trustee may be able to get this money back. For the time being, better to hold off. What this means is that essential payments are going to follow a roughly ordered hierarchy as follows: payments on the place you live, i.e. rent or mortgage if you intend to keep the home; utilities; payments on your primary means of transportation; fines whose nonpayment could equal jail time; support payments like alimony and child support; income taxes; and student loans. For payments on your house and your primary vehicle, the thing to ask yourself is whether the asset is worth less than what you owe on it. If you intend to keep either of these, then you have to keep current on the payments. If you have to stop paying bills, make sure you're doing so rationally, and keep your plan to yourself; there's no need for bill collectors to know your strategy before you've worked one out with a bankruptcy lawyer. Remember, the most rational step of all when you're at this point is to start considering if bankruptcy is right for you.

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