What are low-priority debts?

Low priority debt includes credit that is borrowed without collateral. This includes credit card debt and medical debt, such as doctor and hospital bills. These types of debt don’t require collateral such as a house or car and are considered to be unsecured debt.

This type of debt is also a low priority. A creditor may ask you to use some of your household items as insurance on a loan. However, the odds of a creditor taking your household items in exchange for monetary compensation are rare. Most household items have little resale value, and creditors would need to obtain a court order to seize them. The time is not worth the expense.

Federal student loans are issued by the government. These should be paid before your low-priority debts. Since you acquired these loans with government funding, the law allows the government to pursue collection from you. These collection efforts include paycheck garnishment, tax refunds and liens, and reduction in Social Security benefits. You don’t want to go there. You work hard for your money.

Private student loans are like other types of unsecured debt and should be paid after your high priority debt and your government student loans — but before your low priority debt.

Originally published at https://www.debtmd.com.