Paying the Bills how to Set Priorities when your Debts Outrun your Ability to Pay

Many of you may experience financial difficulty at one point in your lives.  In fact, there may be a time when there are more bills than money.  In this situation, you have to make a decision about which bills you are going to pay and which bills are going to be late or not paid.  In the past, it was very easy to choose to pay your mortgage over your credit cards because you live in your home and if you do not pay, the bank or lending institution could foreclose on your home.  Credit cards are not secured debt.  As such, a credit card company cannot take your home.  This is why people chose to pay their mortgage over credit cards.

However, nowadays it seems that most people owe more on their home than what it is worth.  As such, this once simple decision has become a little more strategic and a little more complex.  Should you pay the mortgage or should you pay your credit cards?

If your home is worth more than what you owe or the same as what you owe, your decision should be very simple.  Pay your mortgage and hold off on your credit cards.  However, as asked above, what if you owe more on your home than it is worth?  In such a situation, there are a couple of options you should consider.

It is important to note that regardless of your decision, a mortgage is still a secured debt and if you fail to pay it, there is a chance that your home will be foreclosed.  But, funny enough, banks and lenders normally will not negotiate with you regarding a loan modification unless you are behind on your payments.  As such, in today’s economic climate you have to be behind and run the risk of losing your home before a bank or lender will consider negotiating with you about modifying your home loan.  This is an interesting situation that requires consideration.

To compound the matter, if you do not have enough money to pay your bills, you may have to tap into your credit line to make it through the rough financial patches.  But, you will not be allowed to access such credit lines if you are late paying the same. 

Therefore, in the event you are upside down on your mortgage (meaning you owe more on your home than it is worth) and you do not have enough money to pay all of the bills due in a given month, you can choose between being late on your home loan and thus, risk foreclosure but possibly open up the door for a loan modification, if you are eligible, or be late on your credit cards and protect your home but run the risk on being unable to access your credit at a later date.

The decision is yours, but regardless of your choice, make sure that you try to fix the current financial problem you are facing or else it will not matter which bill you avoid this month because if you do not fix the problem, you will eventually default on everything.