Introduction

When it comes to managing your money and debts, understanding the concept of priority debts is very important. In the United Kingdom, priority debts hold significant importance as they are given precedence over other types of debts in terms of repayment and consequences of non-payment. This article aims to provide a comprehensive overview of priority debts in the UK, including their definition, examples, and the legal implications associated with them. By understanding priority debts and their implications, it will enable you to make informed decisions and take appropriate actions to address your debt or debts.

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Definition and Characteristics of Priority Debts

Priority debts are considered more important and hold higher significance due to various reasons, such as the potential impact on an individual’s well-being, livelihood, or basic needs. The priority debt framework helps to ensure that essential services are maintained, and individuals’ rights are protected.

These debts are those that carry the most serious consequences if you don’t pay them. They don’t have to be the largest or debts with the most expensive interest rates, but not paying them could lead to serious problems. Credit card or loan companies might call or text you once you miss their payments, but don’t be fooled. They are not priority debts.

Priority debts include:

  • Rent arrears
  • Mortgage arrears
  • Secured loans
  • Gas and electricity debt
  • Court fines
  • Council tax arrears
  • Income tax arrears
  • Magistrate court fines
  • TV licence arrears
  • Child maintenance arrears

A hire purchase car can be considered as a priority debt, depending on your circumstances.

For example, if you need it for work, family and have mobility issues and do not have another car or access to one or public transport that you can use. In this case it will be deemed to be a priority debt.

Importance of Paying off Debts in the Right Order

The consequences of not paying off some debts before others can be more serious. Therefore, if you’re struggling to make your repayments on time, you need to categorise your debts into:

  1. Emergency debts
  2. Priority debts
  3. Non-priority debts

Some key characteristics of priority debts include:

  • Legal consequences for non-payment
  • Payments necessary for basic needs

Examples of Priority Debts

  • Mortgage or Rent arrears: Can lead to eviction or repossession.
  • Council Tax arrears: Non-payment can result in court action and bailiff enforcement.
  • Gas and Electricity arrears: Lack of heating or lighting can impact well-being.
  • Income Tax or VAT arrears: Can lead to severe penalties, fines, and legal action by HMRC.
  • Court Fines and Penalties: Additional fines or imprisonment.
  • Child Maintenance Arrears: Legal implications and impact on well-being.
  • Secured Loans: Repossession of the asset.

Implications and Consequences

Non-payment of priority debts can lead to severe consequences such as:

  • Eviction & Possession
  • Attachment of Earnings Order (AEO)
  • Charging Orders
  • Bailiff Enforcement
  • Bankruptcy or Insolvency

Dealing with Priority Debts

If facing priority debts, take prompt action by:

  • Prioritising Payments
  • Seeking Advice and Support
  • Negotiating Repayment Plans
  • Exploring Debt Solutions

FAQs – Frequently Asked Questions

What debts are in order of priority?

  1. Rent Arrears
  2. Mortgage Arrears or secured loan arrears
  3. Council Tax Arrears
  4. Gas or Electricity bills
  5. Phone or Internet bills
  6. TV Licence payments
  7. Court Fines
  8. Overpaid Tax Credits

Which debts to pay off first?

Seek debt advice to explore debts and make suitable recommendations.

What is classed as a non-priority debt?

Bank loans, credit cards, payday loans, bank overdraft, and store cards, and benefit overpayments.

What bills are the most important to pay?

Mortgage or rent payments, council tax, utilities, and essential bills.

Is Mobile Phone debt a Priority debt?

If needed for work, contact and no other alternative is available, it’s a priority debt.

Is Council Tax a priority debt?

Yes, it is a priority debt.

What is classified as debt?

Debt is usually a sum of money or anything owed by one person to someone else or to a company.

Conclusion

I hope that this article has provided you with the knowledge you need to manage your debts effectively. Knowledge is power; hence, I am sharing my knowledge so that you can take back control of your money and seek advice.

I hope this will help you to start taking the first steps in your journey to living your life without the stress or worry about your money situation.