I meet with a lot of people facing financial difficulties. It's what I do. When income goes down, and the bills go up, money becomes short. I talk to people who are not sure if they want to do bankruptcy. Before they leave my office, I always explain the priority they should place on every bill. Some bills are more important than others.
The first priority is always your mortgage. If you don't pay your mortgage for three or more months, the bank can take it back. It's that simple. A mortgage can always be made current through a Chapter 13 bankruptcy, but that could potentially make your life more difficult if you could also qualify for a Chapter 7 bankruptcy. If it comes down to paying on your credit cards or your mortgage, you should always pay the mortgage first. Yes, creditor phone calls can be annoying, but protecting your home should always be the first priority. It is much more difficult to purchase a new home. Pay the mortgage first.
The second priority after your mortgage is either your car payment or utilities, depending on the circumstance. You need to keep the lights on, the water running, and the heat going, if you are going to live reasonably. So, utilities are usually the next most important priority. Of course, if you need your car to get to work, it becomes vitally important, too. Public transportation is not always an option, or getting a ride. You can generally miss two payments, but after that, your are risking repossession. Utilities can usually be several or more months late before you will face shut-off notices. But, these notices should be taken seriously.
Your last priority after your home, utilities, and car payment is unsecured debt such as credit cards, medical bills, and taxes. You can get sued for not paying these unsecured debts, you could get annoyed by calls and threatening letters, but... you won't need to leave your home or walk to work if you miss these payments. I meet too many people facing foreclosure who paid credit card debt far too long. These payments can be missed while you contemplate bankruptcy.
Where is the cut-off point where you should file bankruptcy? That depends on circumstances, but if you are having trouble paying utilities, you should be strongly considering it. If you are facing a foreclosure, you should immediately speak to an experienced bankruptcy attorney. Your home can be saved in a Chapter 13 bankruptcy, or you can buy yourself some time and walk away in a Chapter 7 bankruptcy. Also, if you are making credit card payments but the principal on the debts does not get lower, consider bankruptcy.
Contact us if you are facing financial difficulties and having trouble making all of your payments. Make sure you figure out what is most important in your circumstances, and pay your creditors accordingly.