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Is It Wise To Pay Credit Card Bills Before Tackling Other Debt?

When debt becomes overwhelming, one of the biggest challenges is determining which bills to pay first. Do you prioritize installment loans like mortgage payments and car payments, or do you focus on credit card debt and other high-interest debt? What if there are medical bills in the mix as well?

A recent article from NerdWallet favors paying down credit card bills first, but is that really the best decision in all situations?

Reasons To Pay Down Credit Card Debt First

The article argues that credit card debt should be prioritized for a couple reasons. First, paying down credit card debt can have a greater positive impact on your credit score, because it leads to lower credit utilization. Second, credit card debt tends to have higher interest rates, not to mention the excessive late fees that you will be subject to if you miss a payment. Credit card debt often spirals out of control because of these factors.

However, the article seems to assume a relatively healthy amount of debt. But what if debt has become unmanageable?

Understanding Secured Versus Unsecured Debt

Secured debt is debt that is secured by some form of collateral, which can be taken away in the event of nonpayment. Your mortgage is secured debt, because your home is subject to foreclosure if you do not pay. Your car loan is secured debt, because your car can be repossessed if you do not pay. On the other hand, unsecured debt is debt that is not secured by any form of collateral. Credit card debt is unsecured debt in most cases.

With this in mind, does it really make sense to let mortgage payments and car payments stack up while you pay off credit card bills?

Considering Your Debt Relief Options

If you have reached a point where your debt has become unmanageable and you are being forced to make decisions every month about what bills to pay and what ones to take the interest and late fees on, you may want to consider a debt relief option such as bankruptcy.

Bankruptcy can eliminate most kinds of debt and is particularly effective on credit card debt and other types of unsecured debt. By filing bankruptcy, you may be able to regain control of your finances and not have to worry about deciding which bills to pay first.

At Russo White & Keller P.C., our attorneys can assess your debt load and help you determine whether bankruptcy makes sense for you. We will not push you into this option if it is not right for your situation, or if there are other alternatives available. We simply want you to achieve a healthy financial situation.  Remember, our initial consulation is always free.

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