What are considered priority debts?
October 25, 2018
When you’re in serious debt and the situation has become unmanageable, it’s crucial to divide your creditors into two categories – ‘priority’ and ‘non-priority.’ This helps to protect your home, whether you’re renting or own your property, and may prevent the utility companies from cutting your supply.
What exactly are priority debts?
When you’re considering whether a creditor should be prioritised it’s important to consider the action they can take against you for non-payment, rather than the size of the debt or interest rate attached to it.
You can be sent to prison if you fail to pay your council tax without good reason, for example, or you don’t pay a magistrates’ court fine, but arrears of credit card or catalogue payments are not considered a priority.
With this in mind, which debts do you need to prioritise and what are the potential consequences of non-payment?
Failing to pay your rent can lead to eviction whether you’re living in social housing or you’re renting in the private sector.
Mortgage or loan secured on your home
If you don’t keep up repayments on your mortgage, or indeed any loan secured against your property, your home can be repossessed by the lender.
Council tax/arrears of child maintenance
Getting behind with your council tax or arrears of child maintenance carries significant penalties, and can result in visits from the bailiffs. If enforcement action follows it could potentially involve wages arrestment whereby a pre-set sum of money is deducted directly from your earnings to repay the debt.
Other consequences might include the debt being secured against your home so that if you sell at any point it must be paid off from the proceeds. As we mentioned earlier, if you refuse to pay your council tax or have no reasonable grounds for non-payment, a prison sentence can also be served.
Magistrates’ Court fines
Non-payment of magistrates’ court fines can lead to a visit from the bailiffs, similar enforcement action to arrears of child maintenance and council tax, and imprisonment.
Tax, National Insurance, and VAT
Gas and electricity
Failing to pay your gas and electricity bills can lead to your supplier cutting you off, although they should be open to reaching an agreement to pay off the arrears. They’re obliged to offer you a number of payment methods before this final action, which is used only as a measure of last resort.
You can receive a fine of up to £1,000 plus legal costs for failing to pay your TV licence.
County Court Judgment (CCJ)
You’re likely to be visited by bailiffs if you don’t pay a County Court Judgment. Enforcement action could take the form of earnings arrestment or a charging order on your home. This effectively secures the debt against your home so if you sell it in the future, the debt must be paid from the proceeds.
What to do if you can’t pay priority debts
In the first instance, it’s crucial to contact your creditors to let them know about your situation, and also to offer a smaller payment amount if possible. You should obtain professional debt help if your financial position is serious, as a formal debt procedure may be your only option in preventing bankruptcy.
UK Debt are insolvency specialists and can provide the guidance and support you need at this worrying time. Please contact one of our experts to arrange a free same-day consultation – we’ll assess your situation and explain your best options.
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