People have to live so in assessing which bills to pay first, one must consider the essentials of life – food and shelter.
Making sure you pay your priority debts comes before all your other debt payments and is regardless of whether you are getting pressure from your creditors. Your priority debts are paying for somewhere to live, food and drink, clothing and heat & light, your main necessities. Priority debts may also include your mortgage. So then you must aim to pay these bills first – the mortgage / rent, utility bills including heat, light and water, and of course food, drink and clothing. Even in a situation where there is insufficient income or money to pay all of the bills, these essentials of life must command the most attention from us or day to day living will become impossible.
All other debts are non-priority debts and must rank for payment down the pecking order. Unfortunately, we come under pressure from the creditors who scream the loudest for payment. These creditors, particularly credit card providers, often send us threatening letters or phone us frequently and aggressively or call to our homes. However, we cannot afford to lose our home and be put out on the street. We cannot afford to have our utilities cut off. We cannot live without food, drink and clothing.
Having made our priority payments then, any money left over can go towards paying any other unsecured debts. We call this money disposable income or DI for short. If our DI is big enough to service our non-priority debts (usually unsecured) by paying the contractual monthly amounts, we have no problem. If it is insufficient, the tricky bit is firstly to divide it fairly between all our creditors and secondly to reach agreement with these creditors on the amount of our monthly payments.
If you cannot arrange this yourself then the next step to take is to obtain professional advice. You can contact an Insolvency Practitioner and they will determine if you are insolvent or not. They can also assist you in compiling an Income & Expenditure Statement so as to calculate your disposable income, and also explain all available options to you.
Once you have your options you can make up your mind if you want to proceed further. We have to commit to nothing at this point and can walk away and ‘sort out’ our own finances.
Read more about being free from debt at National Debt Relief. Here you can also read further about debt help options available to you.