If you find yourself in a spiral of debt, you must identify which debts are the most important to pay back first. These are known as your ‘priority debts’. They aren’t necessarily your biggest debts but they are the debts where the consequences for not paying are the most serious.
According to Directgov, the UK government’s digital service for people in England & Wales, these are the debts that you should consider priority debts and non-priority debts:
- Your rent, mortgage or loans secured against your home – if you fall behind with repayments on these, you could lose your home.
- Council tax – tell your council if you’re having trouble paying, in the most very serious cases they may send bailiffs to your home.
- Income tax, national insurance and VAT – underpaying could result in you being made bankrupt.
- Utility bills – not paying these could mean your services are disconnected.
- TV licence – non payment can result in a hefty fine or even prison.
- Other priority debts include anything bought on hire purchase, tax credits overpayments, maintenance and child support payments, court fines and even parking fines.
You still need to deal with these debts but they should be addressed after your priority debts. You may not lose your home or go to prison for not paying these debts but you can still be taken to a county court and ordered to pay what you owe, often with additional court costs.
If you still don’t pay after you’ve been ordered to do so by the court, there are a range of actions your creditors can try to take against you so it is just as important to seek help if you’re struggling with your non-priority debts.
Non-priority debts include:
Credit card or store card arrears
Overdrafts and personal loans
Loan shark loans
Money borrowed from friends and family
Gym and health club memberships
If you are struggling with debts, whether they are priority or non-priority debts, contact us. We can help you get back on the road to financial freedom.