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Prioritizing Your Debt: The Right Order for Payments

Household consumer debt is more than $11 trillion according to the Federal Reserve, which is around $35,000 per person in the United States. And it’s easy to figure out where that debt is coming from, once you count up student loans, mortgages, car loans, credit card debt and uninsured medical procedures. In fact, the U.S. household consumer debt profile is:

 $15,185: Average credit card debt
 $147,133: Average mortgage debt
 $31,509: Average student loan debt

If you find yourself buried under financial obligations, you might need to prioritize which debts you pay and when. One of the easiest ways to figure out which debts should be paid first is to look at the interest rates. Which ones will cost you the most interest if you miss a payment?

Second, don’t forget to talk with your creditors. Be proactive and see if they will negotiate a better repayment schedule for you.

Next, remember that it’s hard to deal with debt without a roof over your head. Making sure the essentials are paid, like mortgage or rent, utilities, auto loans, etc. If you owe student loans or child support, make sure that you are paying those debts as well.

From there, you should pay off any credit cards that have a high interest rate. Penalty rates for late payments can reach up to 30% APR, and it’s easy to get behind when just paying the minimum payment.

Finally, if you’ve got so much debt that you are facing wage garnishments, foreclosures and lawsuits – or if you’ve just had enough and can’t deal with the situation anymore – you may want to consider filing a Chapter 7 or Chapter 13. It will help you get a fresh start and gain control over a stressful situation.

Call us today at 816-842-6200 to speak with an attorney. Or you can email us and schedule your free consultation.


Jason C. Amerine
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President and Owner, Castle Law Office of Kansas City
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