How to know which types of debt to pay first
Learn how to prioritize bills and debts in Baltimore to avoid financial instability. Expert advice on managing high-priority vs. low-priority debts. The post How to know which types of debt to pay first appeared first on AFRO American Newspapers.
Black News 
By Courtland Merkel
Handling money has become increasingly difficult, and almost every Baltimore family is struggling with an important question: Which bills and debts should we pay first?
To answer this question, it is important to understand that not all debt is equal. Some debts can damage your credit score if left unpaid, while others can threaten your home or transportation.
The first rule of debt management is to prioritize debts that can immediately harm your family if they are not paid. These are considered “high-priority” debts because falling behind on them can quickly and severely affect your household.
Housing should always come first. Rent and mortgage payments are among the most important financial obligations because missing too many payments can lead to eviction or foreclosure. Losing your home can create long-term financial instability, which is why housing should remain a top priority.
Property taxes are also important. If you do not have an escrow account with your mortgage lender, you are responsible for paying your own property taxes. While nonpayment may not result in the immediate loss of your home, unpaid taxes can eventually lead to a tax sale.
Transportation is another major priority. If you rely on your vehicle to get to work, school, or medical appointments, missing payments on a car loan or lease can result in repossession after only a few missed payments. Losing reliable transportation can quickly affect employment and household income.
Many families make the mistake of prioritizing lower-priority debts simply because debt collectors call frequently or because the payments are smaller.
Credit card balances, medical bills and retail charge accounts generally do not create immediate threats to your housing, transportation or income.
Medical debt includes bills from hospitals, doctors, dentists, ambulance companies and other healthcare providers; these are usually considered lower priority. In many cases, medical debt does not affect your credit report for at least a year and often carries lower interest rates and fewer penalties. Further, medical debt does not usually result in the immediate loss of property or income unless a creditor successfully sues you.
Debts you owe as a co-signer may also become high priority. If you co-signed for someone else’s loan and used your home or vehicle as collateral, failure to pay could place your property at risk.
Credit card debt is generally considered low priority. Credit card companies cannot seize your bank accounts, wages, or property unless they first sue you in court and obtain a judgment against you. Compared to other types of debt, credit card debt should rank lower than keeping your home.
Debt can feel overwhelming, but not all debt carries the same consequences. By protecting essentials first – housing, transportation, utilities and legal obligations – families can stabilize their finances and avoid the most damaging outcomes while working toward long-term recovery.
Free Legal Help: Contact Maryland Volunteer Lawyers Service at 410-547-6537 or apply online at mvlslaw.org/free-legal-help/.
The opinions expressed in this commentary are those of the writer and not necessarily those of the AFRO.
The post How to know which types of debt to pay first appeared first on AFRO American Newspapers.
