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Priority Debts: What are they and how do I tackle them?

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Priority Debts: What are they and how do I tackle them?

Priority debts are just that – a priority. If you’re struggling to pay your bills and the debts are mounting up, it’s important to take control of the situation as soon as possible. Burying your head in the sand will only make things worse in the long run, so the advice given out by Citizens Advice is to make sure your creditors (the people you owe money to) know you are having financial problems. If you don’t, the danger is they could assume you don’t want to pay and may take action against you.

The first thing to do though is to work out exactly how much money you owe and who to. Some debts are more important than others because they could result in you losing your belongings or home, being fined or even sent to prison. These urgent debts are known as priority debts, owed to priority creditors.

Priority debts include:

  • Mortgage or rent arrears
  • Overdue gas and electricity bills
  • Council tax arrears
  • Court fines
  • Maintenance arrears, including debts owed to the Child Support Agency or Child Maintenance Service
  • Income tax or VAT arrears – you can be sent to prison for non-payment of tax or VAT.
  • TV licence

Priority debts: what are they and how to tackle themYou will then need to work out your household budget – that is a list of money coming in to your home every month against money going out. This way you can work out how much money, if any, is left over and how much you could realistically pay back to your priority creditors.

After you have dealt with the priority debts you can look at the less urgent, or ‘non-priority debts’, such as credit cards, overdrafts and loans. Once you’ve worked out how much you can afford to pay back, you need to contact your creditors with your plan to see if you can come to an arrangement to settle the debt. If you haven’t got enough money to pay the debt you will need to get advice quickly. Your local Citizens Advice Bureau is a good place to start.

Tackling priority debts

Get in touch with the people you owe money to as soon as you can to tell them why you are in debt and what you plan to do about it. Contacting them by phone is probably the quickest way, but you need to make a note of all calls and any meetings, including the date and time you made the call, the name of the person you spoke to and the outcome of the conversation. Follow phone calls up with a letter, confirming what was said. Make sure you keep copies of any letters.

If you’re not in a position to offer any money straight away, then ask for more time while you get some specialist advice on what to do next. Priority creditors may not agree to this though so you might have to offer to pay something on top of your usual repayment until you can get further help. Most creditors will consider a reasonable offer of payment, so make sure they are aware of your circumstances as they might be willing to give you more time to pay up. Giving them a copy of your budget should demonstrate the situation you are in and what you are doing to resolve it.

Priority debts: What are they and how to tackle themYou might be in a position to offer regular weekly or monthly repayments until the debt is cleared, but you must be sure that you can meet this payment.

If court action is threatened

Contact your creditors straight away if they are threatening to take action or have started legal proceedings against you. If they haven’t started the action, ask them to delay for a further two weeks so you can work out an offer and contact them again. Even if proceedings have been started, they may be willing to come to an agreement with you and may stop the action if they are satisfied with your offer.

However, even if the creditor pursues a court case, you will usually still have the opportunity to make an offer of repayment. If you can’t afford to pay anything and you don’t see your situation getting any better then you’ll need to get advice straight away. A specialist advisor will be able to help you negotiate with your creditors.

 

 

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