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What's the best way to prioritize my debts for repayment?

Many people in Massachusetts who feel overwhelmed by debt make the decision to file for personal bankruptcy. But, before making that decision, it's generally a good idea to determine if there's a way to reduce debt to a manageable level without filing for bankruptcy.

Successfully paying down debt requires some planning. It is generally advantageous to prioritize debts for repayment because different debts have different interest rates, different penalties for late payments and different consequences if you default.

For homeowners, the first priority is usually catching up on mortgage payments. If the interest rate on the mortgage is low, it may make sense to make the minimum payment necessary to prevent foreclosure while paying down higher interest rate debts. Taxes and child support payments are another high priority debt. There can be serious legal consequences if a Massachusetts resident falls behind on these obligations.

The next priority for most people is credit card debt. When paying down credit cards, it's best to pay off the card with the highest interest rate first, while making minimum payments on the others. Finally, student loans typically have relatively low interest rates, and repayment can usually be temporarily deferred if you are facing financial challenges. It often makes sense to defer student loan repayment until other debts with higher interest rates are paid down.

Some people will unfortunately find that even with solid planning, they simply don't have the resources to pay down their debts. For people in this situation, Chapter 7 or Chapter 13 bankruptcy may be the best strategy to get a fresh start financially.

Source:, "Which Debt to Pay Off First," accessed Nov. 4, 2016

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