Expert debt views & facts

Priority debts are your most important debts – ones which cover your essential costs of living. Your priority debts include:

Mortgage / Rent
Secured loans
County Court Judgments (CCJs)
Magistrates’ Court fines
Gas, water, electricity & telephone
Child maintenance
Council tax
Tax
VAT
National Insurance
TV licence
Essential Hire Purchase goods (e.g. washing-machines, cars)
Certain overpayments for benefits & Working / Child Tax Credit

If you do not keep up on your priority debt repayments, you could:

• face losing your home / eviction
• have your gas/electricity/water supply cut off
• have your possessions taken by bailiffs
• face a jail sentence (but only in extreme circumstances)

So if you are struggling to repay your priority debts, it’s essential that you get in touch as soon as possible, and explain your situation. Don’t try to hide from your problems – this will only make things worse.

What should I do if I’m struggling with priority debts?
With most priority debts, one or more of the following may be an option:

• Tell your creditors about your financial situation, and what you’re doing about it. The more actively you’re trying to improve your financial situation, the more likely they are to understand and want to help you.
• Ask your creditors if they’ll consider reducing your payments or freezing any interest or charges for a while. If they can see that they are unlikely to receive the full amount as fast as you’d originally agreed, they may make this compromise to make it easier for you to pay back as much as you can, as fast as you can.
• Check if you qualify for any benefits – such as Housing Benefit, Council Tax Benefit or tax credits. Many benefits are available whether you’re working or not, and you could qualify for more than one.
• On the other hand, if your financial situation has improved since you missed payments, you can ask your creditors about the best way of repaying the arrears (on top of your ongoing payments.
• If you are struggling because of non-priority debts, focus on your priority debts first and foremost. Your priority debts are the ones that support your basic standard of living. It would be much worse to have your home repossessed than having your mobile phone connection cut off.

There are other options available for some types of credit – for example:

Mortgages/Secured Loans

• If your agreement allows it, you could ask about taking a payment holiday. Some lenders will accept a period from one month up to a year in which you do not make repayments, which could help you get back on track if you are struggling with other debts.But be warned: you will still have to pay the outstanding amount at a later date, and your interest will probably still be growing – so you may end up paying more in the long run.
• Consider remortgaging.
  • If you have equity tied up in your home, you can borrow some of this back to pay off your debts (click here for more on debt consolidation remortgages*).
  • A remortgage can also allow you to lower your monthly payments, which may make it easier for you to repay your debts – but remember that this will mean you are repaying your mortgage for longer.

Utility bills

• Ask about having a pre-paid meter installed. ‘Topping up’ from time to time will make it easier to keep track of how much you’re spending.

But remember…

• If you do come to an agreement, ask your creditors to put it in writing. Make sure you keep their letters, and keep copies of everything you send. This way, you’ll always have something to refer back to in future.
• Always keep any financial documents you receive (bills, payslips, etc.). This will help you keep track of payments, and your creditors may ask to see them.