Priority and non-priority debts
What is a debt?
A debt is money that you owe to an organisation or another person. The organisation or person that you owe the money to is called the ‘creditor’.
Normal bills, for example rent, mortgage or electricity are not debts. They are essential expenses. But if you fall behind with any essential expenses, the money you owe is a debt.
Try separating out your debts into two categories. This can make sure the most important ones are paid first. The two categories are priority and non-priority debts.
Priority debts
A priority debt is a debt that means you would lose something if you did not pay it. Because you might lose something, they are more important than other debts. If you have both priority and non-priority debts, it is vital that you deal with the priority debts first.
If you have both priority and non-priority debts, it is vital that you deal with the priority debts first.
|
Example of priority debt |
What might happen if I don’t pay it? |
|
Mortgage or secured loan arrears |
Repossession of property |
|
Rent arrears |
Eviction from property |
|
Council tax arrears |
The council can sell your items to recover the debt/arrestment of wages or earnings/deductions from benefits |
|
Gas / electricity arrears |
Disconnection |
|
Sheriff Court fines |
Imprisonment |
|
Child maintenance arrears |
Imprisonment or disqualification from driving (if you refuse or neglect to pay) |
|
Hire purchase arrears |
Repossession of hire purchase goods |
Non priority debts
A non-priority debt is any debt that is not a priority. This might include credit cards, unsecured loans and overdrafts. It also includes debts such as money owed to family and friends.
All non-priority creditors should be treated fairly. You should not make full payments to one creditor while reducing payments to another. If you cannot afford the minimum payment to any of your non priority debts, you should make reduced payments to all of them using a pro rata calculation. You can find more information about this in the self-negotiation section.
A debt adviser will help separate your priority and non-priority debts before explaining what options are available to you for dealing with them. You can find a debt adviser in our next steps section.
