Which debts do I pay first? You first should use your money to pay for what
is most necessary for your family -food, clothing,
shelter, and continued utility service. Because
there is very little a debt collector can
actually do to you, debt collection efforts should have no effect on your decision about which debts to pay first. Threats to bring suit, to seize
household goods or garnish wages should be
given little weight unless a lawsuit has actually
been filed and you receive court papers.
Some general rules for setting payment priori-
ties are:
Mortgage and rent payments should
always come first.
Make whatever payments are
necessary to insure essential utility
service is not disconnected. The
utility company may not require
payment in full even if you are behind.
A car loan should be paid after critical
items (food, rent, clothing), but before
most other debts for nonessentials.
Generally, loans with only household
goods as collateral should be paid
after more pressing debts.
Debts without property pledged as
collateral, such as credit cards, doctor
and hospital bills, and accounts with
merchants, should have low priority.
The threat of a lawsuit should not
raise the priority of a debt above that
of mortgage, rent, utility payments,
and a car loan.
Do not pay those debts that you have
a good legal reason not to pay, such as
when the car you borrowed the money
for is a lemon. Instead, seek legal
advice as to how to best fight for your
rights.
When a creditor wins a lawsuit, the
consumer's home and other assets
may be at risk depending on state law
and the amount of equity in the
property. If the property is truly at
risk, make this a high priority debt.
Tax liabilities and student loans
should be paid ahead of low priority
but after top priority debts.
Back to Top
Dealing with Debt Collectors Once you have decided which debts you are
able to pay and which will have to wait, the next
step is to deal with the collectors that aren't
being paid first. Back to Top
How should I deal with debt collectors? Don't let them pressure you into making the
wrong choices about what to pay first. For
example, explain to the debt collector, "I have
to pay my rent and utility bills first. I have been
recently laid-off; when I get a new job I will do
my best to meet my debt." Back to Top
What can a debt collector really do? A debt collector collecting a debt of the creditor can do little more than demand payment. If the creditor has not taken your house, car, or other property as collateral on a loan, then legally the creditor can only do three things:
1. Stop doing business with you.
2. Report your default to a credit bureau (which
will be unavoidable when you cannot pay most
of your debts on time).
3. Sue you in court. Although the threat to sue
you may be very upsetting, it is not nearly as
serious as you might think. Many creditors do
not follow through on their threats.f they do
sue you, you can represent yourself, and explain
why you cannot or should not pay. After a
period of time, the creditor may obtain a court
judgment, but this judgment still does not force
you to pay the debt. It only gives the creditor
the right to try to seize part of your wages or
particular property. If you do not own very
much or if you do not earn very much, they will not be able to seize any of your property or wages even though they have a court judgment
against you. Only if you are hiding assets can a
creditor seize wages or property before a judgment;
they can't send the consumer to jail or
send the consumers children to foster care. Back to Top
How can I stop being harassed? Federal law prohibits harassment by collection
agencies or attorneys. For example, they may
not contact you at unreasonable hours: before
8 am. or after 9 p.m., unless you give your
permission. They also may not use obscene or
profane language or call you constantly to annoy
you. Some states also have laws that provide
similar protections against creditors.
Consumers being harassed by debt collectors
should call us 718-766-5193: Back to Top
