You may be wondering what are your priority debts and how to manage them. Don’t worry. You have come to the right place to find answers to that question.

In today’s fast-paced world, managing finances can often feel like navigating a complex labyrinth. It can become really hard if you are dealing with various types of debts at the same time.

A critical aspect of this journey is understanding the difference between priority and non-priority debts. It’s because each carries its own set of consequences and levels of urgency.

This guide is your compass to navigate the often confusing world of debts, whether you’re struggling to keep up with your payments or just seeking to better organise your financial commitments. It will help you make informed decisions to maintain financial stability and peace of mind.

Table of Contents

1. What Is Considered a Priority Debt?
2. Need more help dealing with your priority debts?
3. Which Debts and Bills Are Top Priority?
4. Which Loans Are Not Priority Loans?
5. What are the alternative solutions available in the UK to deal with your priority debts issues?
6. Key Points
7. FAQs

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What Is Considered a Priority Debt?

Priority debts are those that can have severe consequences for you if you do not settle them fully or in a timely manner. Hence, you need to prioritise settling those debts in order to avoid experiencing inconveniences that could disrupt your financial stability.

Now, you may be wondering what consequences you may have to face if you do not prioritise settling or find a solution for those priority debts.

Here are some experiences you may end up facing if you do not settle your priority debts on time.

Essential services being cut off: You may lose your gas, electricity, or water supply if you don’t pay your bills.
Constant reachouts: Your lenders may try to get in touch with you in every way possible (phone calls, letters, emails, and home visits) to recover their money.
Court summons or even imprisonment: In extreme cases, not paying certain priority debts (like court fines or child maintenance) can lead to legal action and even imprisonment.
Bailiffs visiting you: Bailiffs can be sent to your home to seize your belongings to pay off your debts.
Losing your home: This could happen through eviction for rent arrears or repossession of your house for mortgage arrears.
Garnishing Monthly Wage: A portion of your monthly wage will be garnished till the money you owe gets settled.

Keep in mind that priority debts are not necessarily always the debts with the highest interest rates. The key factor is the potential severity of the consequences if you don’t pay them.

Need more help dealing with your priority debts?

There are a number of alternative debt solutions available in the UK that you could use to write off some of your priority debts. But keep in mind that choosing the right solution will aid you in writing off some of your debt, while choosing the wrong one will worsen your debt situation.

Here, the key is to determine what debt solution suits your personal financial situation in the best way possible. Fill out below online form to find a reliable solution to your debt issue using the help of our professional MoneyAdvisor team member.

Which Debts and Bills Are Top Priority?

Here are some common examples of priority debts in the UK that you need to prioritise if you have any of them.

It’s really important for you to pay your rent payments on time. Below are some of the common consequences that you have to experience if you do not prioritise them under priority debts.

Risk of Eviction: Your landlord will take action to evict you if you do not keep up with the rent payments on time, according to your agreement with him. Imagine having to leave your home. That’s the reality of ignoring this crucial debt.
Your landlord may take legal action if you do not leave their property upon their request.
Long-Term Consequences: Eviction can tarnish your rental history as it lasts for 7 years in your rental history. Hence, you may face hardship in finding a new place to stay.

Thus it is better to settle your rent payment dues and get done with it as soon as possible.

You need to make sure to include your mortgage debts into the priority debts list. It’s because neglecting payments on secured debts, like a mortgage loan, can potentially result in losing your valuable assets.

It is crucial to treat mortgage loans as high-priority debts. Keep in mind this valuable piece of financial advice: when a debt is secured by collateral, it inherently carries a significant level of priority.

Below are some of the consequences you may have to face if you fail to pay mortgage arrears on time.

Losing Your Home: Failing to pay a mortgage means you could lose your home if you.
Secured Debt: Secured loans often involve your home or valuable assets of yours as collateral. Missing payments can result in repossession. Thus, you need to prioritise them unless other housing debts pose an immediate risk.

Below is a question asked by a forum user asking for help on whether to prioritise paying mortgage arrears.[Source]

This is one of the responses given by another forum user to the above question.[Source]

Council tax funds local services like waste collection and libraries. Thus, you need to make them a high priority when it comes to settling debt.

Below are some of the risks you may end up experiencing if you do not pay Council tax on time:

Legal Action: Not paying council tax can lead to legal actions. Severe arrears can lead to legal action, bailiffs, and even imprisonment. Jail time is not a joke. It is a real possibility regarding this case. Especially in situations where you have the capability to pay but choose not to.
Additional Charges: Late payments can incur extra charges that will aid in increasing your total debt.

Utility bills, including those for gas, electricity, and internet services, fall under the category of priority debts. Thus, your utility suppliers will definitely take action to recover the due payments if you ignore them paying on time.

Consequences of ignoring can include the following:

Disconnection: Non-payment can lead to disconnection. It could leave you without crucial utilities such as no heat, no light, or no internet. We all know that we cannot live without these essentials in today’s new world.
Reconnection Fees: Your utility suppliers will charge a fee for reconnecting your utilities back again. Plus, the inconvenience is something you’d want to avoid.

We strongly advise you not to ignore any court fines at any time. Otherwise, it will escalate to a situation where you might not be able to resolve it easily.

Here are some consequences you may have to face if you do not find a reliable solution to your court fines issue as soon as possible.

Increased fines: The court will again order you to pay a greater fine if you ignore the first court fine order.
Baillfs involvement: the court will grant permission to use bailiffs in order to visit your home and seize your valuable belongings. Later, sell them in an open auction to recover the total fines and bailiff fees.
Wage Cutting: The court can order the bank to cut a portion of your monthly wage until it settles the total fine.
Imprisonment Risk: Ignoring court fines, especially if you have the means to pay, can lead to imprisonment. It is not a risk worth taking.
Reputation Damage: Legal issues can impact your reputation and future opportunities.

Ignoring these can lead to penalties and further debt. Hence, you need to prioritise according to severity and potential penalties.

Below are some of the consequences you have to go through if you fail to settle these Income taxes, VAT, Overpaid Tax Credits, and Unpaid Child Maintenance.

Unpaid Income Tax, National Insurance, or VAT: Ignoring these can lead to penalties and further debt.
Overpaid Tax Credits: You’re bound by law to repay overpaid tax credits. Otherwise, HMRC will take legal action to recover them.
Direct Action: The HMRC can directly take money from your account for unpaid taxes or child maintenance.
Child Maintenance: Failing to pay child maintenance is a criminal offence and can lead to legal action. Thus, you need to make paying them a top priority due to its legal and ethical implications.
Hire Purchase or Conditional Sale Debts: Missing payments on these can lead to repossession of the purchased goods.
Long-Term Implications: Unpaid taxes can lead to ongoing financial problems and legal complications.

Now that you know why these are considered ‘Priority Debts’, it’s crucial to manage them wisely. Remember, understanding and prioritising these debts is the first step towards financial stability.

What’s next, you ask? Let’s find out in the upcoming sections!

Which Loans Are Not Priority Loans?

It is equally important to understand what are non-priority loans as well as priority loans. These debts might not lead to immediate consequences like eviction or legal action. But they can grow into bigger problems if ignored.

Plus, Ignoring these debts can hurt your credit score. Ever thought about how a poor credit score could affect you? You may find hardship in getting new loans and credit cards in the future if you have a low credit score.

These loans don’t involve collateral like your home, as mentioned before. So, there is nothing to worry as non-payment won’t directly lead to eviction or repossession. However, late fees, Growing debts due to increased interest rates, and debt collection are likely consequences.

Similar to personal loans, credit card debt primarily leads to financial penalties like late fees and higher interest rates. The longer you leave them, the more interest accumulates. But, the immediate consequences are less severe than priority debts, while legal action is possible in extreme cases.

Neglecting unpaid parking tickets can lead to significant issues, as shown below in general.

Increasing fines and charges: Ignoring paying Parking Tickets for a long time can cause the initial fine to snowball with additional late fees and administration charges. Thus it will significantly increase the debt.
County Court Judgment (CCJ): If the debt remains unpaid for a substantial period, the council might take you to court and obtain a CCJ. As a result, your credit score will have a negative impact.
Bailiff action: It’s really rare to happen. In extreme cases, the council may resort to bailiffs to recover the debt.
Driving license impact: Accumulating multiple unpaid parking tickets can lead to points on your driving license and even suspension in severe cases.

Despite their high interest rates, non-payment of payday loans mainly leads to legal action involving debt collection agencies and impacts your credit score. But there’s no risk of losing your home or essential services due to non-payment.

It’s not as critical as losing your home or gas/electricity, while service termination can be inconvenient. Additionally, legal action for unpaid phone bills is less common than for certain priority debts.

These often have informal repayment terms. However, keep in mind that non-payment can primarily strain personal relationships rather than result in legal action or repossession of assets.

Non-Priority Debts still play a critical role in your financial health, although they might not show any immediate threat like Priority Debt does. It’s a balancing act between managing what’s urgent and what can wait a bit longer.

What are the alternative solutions available in the UK to deal with your priority debts issues?

Sometimes, you may face difficulties in agreeing to the proposed payment plans from your creditor, especially if they are financially burdensome. Thus, your lenders may even turn towards sorting your unsolicited Overdraft debts under bad Credit in your credit report.

In such situations, it is advisable to explore alternative debt solutions that can effectively address your debt-related concerns. In the UK, there are various alternative debt solutions to consider.

However, it’s crucial to keep in mind that each of these debt solutions has specific eligibility criteria. Selecting the right one can lead to debt resolution, while choosing the wrong one could worsen your financial circumstances.

Hence, seeking guidance from a professional debt advisor is a prudent step to take if you find it challenging to determine the most suitable debt solution on your own.

If you need personalised assistance based on your current financial situation, please feel free to complete our online form by clicking here to receive help from our Money Advisor Team.

Key Points

Priority debts have serious consequences if not paid, including eviction, legal issues, and loss of essential services.
Rent payments, mortgage arrears, council tax, utility bills, court fines, and certain taxes are classified as priority debts due to their potential to significantly disrupt life quality.
Non-priority debts, such as credit card debts, unsecured loans, and unpaid parking tickets, while less urgent, still impact credit scores and financial health.
There are a number of individuals in the UK who have managed to write off a portion of their debts using alternative debt solutions.
Ignoring non-priority loans is not advisable as it can lead to a growing pile of debts and long-term financial strain.
To determine if a debt is a priority, assess its potential to cause significant harm to your lifestyle or bring serious consequences.
Failing to pay mortgages or rent can result in losing your home, highlighting the importance of these payments as priority debts.
Balancing the management of priority and non-priority debts is key to maintaining overall financial stability and health.
Seeking advice from organisations like Citizens Advice can provide guidance and help in understanding and managing debts effectively.
Effective debt management requires understanding the consequences of each type of debt and prioritising them accordingly.
The article aims to equip readers with the knowledge to differentiate between priority and non-priority debts and manage them effectively to avoid serious financial repercussions.

FAQs