When organising repayment plans and schemes, one of the most important things to consider is prioritising the most important debts. Priority debts are the debts which are the most important to pay off due to the consequences of missing the payments.
Priority debts can include child maintenance, mortgages, rent and council tax debts. Missed repayments can lead to serious consequences including loss of home, loss of visitation rights and even prison time.
Full List of Priority Debts
- Mortgage or rent arrears: Missed payment could lead to loss of home.
- Utility arrears: Missed payment could lead to disconnection of water and/or energy supply.
- Council tax arrears: Missed payment could lead to court summons, and eventually prison time.
- Arrears of maintenance (child support): Missed payment could lead to seizure of goods by bailiffs, and prison time.
- Court fines: Missed payment could lead to seizure of goods by bailiffs, and prison time.
- Income tax or VAT arrears: Missed payment could lead to prison time.
- TV licence arrears: Missed payment could lead to a fine.
If you have numerous debts, it is important to immediately list these in order of importance from most important to least important. Identify your monthly disposable income (earnings minus cost of living) to determine how many of the important debts you can afford to pay.
You may be able incorporate some of the debts into a debt management plan, wherein a debt adviser will contact a number of your creditors and propose a new repayment rate better suited to your financial situation. The lower rate of repayment may make the urgent debts more affordable.
Secured debts such as mortgages cannot be included in a debt management plan, but the finances freed up by the plan may be able to cover such repayments.
Dealing with Creditors
There are different techniques and steps required for dealing with different forms of creditors. Here we explain how to deal with creditors for different forms of urgent debt.
Mortgage Arrears: It is possible to contact your mortgage provider and determine whether you can:
- Pay interest only
- Pay by instalments
- Add arrears on to the total amount
- Change to a repayment mortgage
These options are dependent upon your mortgage provider and type of mortgage plan.
Rent Arrears: If you rent with a registered social landlord such as a housing association or a local authority, the landlord may accept an amended arrear repayment plan. If you rent with a private landlord, it is important to immediately seek advice if you enter into arrears as a private landlord may be more inclined to begin the eviction process quicker than a registered social landlord.
Utility Arrears: Utility providers may consider an amended repayment plan to repay arrears in instalments.
Council Tax Arrears: All local authorities apply different standards to seeking council tax arrears. Contact your local authority to discuss an amended repayment plan.
Arrears of Maintenance: If you are behind on child support payments, immediately contact the Child Support Agency (CSA) to organise arrear repayment. Failure to do so could lead to court action.
Income Tax Arrears: If you have fallen behind on your income tax payments, contact the HM Revenue and Customs (HMRC) to organise an amended arrear repayment scheme.
If you have insufficient funds to pay off your priority debts, it is important to immediately contact a debt advice specialist to determine the best action to take. There are a number of solutions which can be implemented to help repay or wipe out the debts.
The adviser will be able to identify the best solution for your particular situation. These suggested solutions could include applying for bankruptcy which would wipe out many forms of debt.
There are certain types of debt which cannot be included in a bankruptcy plan:
- Student loans
- Child support
- Court/magistrates fines
For expert advice about coping with debt, visit the InControl homepage or call our dedicated team on 0800 072 6623.