Priority vs. non-priority debts
The easiest way to decide if a debt is a priority debt is to look at what the consequence of arrears and a creditor’s action would be.
Priority debts should be dealt with first, before any offers are made to non-priority creditors.
If any debts are likely to result in either the loss of your home, imprisonment, or disconnection of a utility, you should consider them as your priority debts. These include:
• mortgage repayments;
• secured loans;
• electricity/fuel;
• rates;
• income tax;
• fines;
• telephone bills;
• TV licence;
• car HP, if a car is needed for work.
If you cannot manage full payments to a priority creditor, continue making some contributions, even if reduced. This will put you in a better position to negotiate with your lender or creditor. Ask if your creditor will accept reduced payments for a period of time.
Failure to pay non-priority debts may not result in a drastic result, such as repossession or imprisonment, but may mean a withdrawal of credit. Your non-priority debts include:
• bank overdrafts;
• credit union loans;
• credit cards;
• personal loans;
• book clubs;
• clothing catalogues;
• credit sales.
If any of your priority creditors, such as your mortgage lender, threaten urgent action (e.g. with imminent repossession), you or your adviser will need to act quickly to postpone or delay this action.
You will need to make immediate contact with the lender and re-direct any available money into making payments towards the arrears of this emergency debt.
Whether your debts are emergency, priority or non-priority debts, you should seek further advice if you're not sure how to deal with them. Housing debt advice is available from Housing Rights Service on 028 9024 5640.
