Don't get stressed. You're allowed to pay your essential bills and mortgage before considering unsecured debts.

Priority Debts

Summary: advice on what priority debts are, how to deal with them and how an IVA or Debt Management Plan (DMP) can help.

What is a priority debt is subjective - but for the purposes of this article, a priority debt is one which the none payment of soon results in severe consequences. Examples of priority debts includes your mortgage payments and utility bill arrears.

How Harrington Brooks Helps With Priority Debts

Please call us for specific advice on how best to deal with any given priority debt – our advisors will be happy to take the time to give you advice.

Priority Debts are similar to other essential outgoings such as food and council tax in that they must be budgeted for before any payments towards to unsecured debts are considered.

An IVA or Debt Management Plan works by determining such essential expenditure so you know how much you can afford towards unsecured debts. Priority debts are normally considered to be an expenditure item, while other debts may be included as “creditors" in the plan. Creditor payments can be subject to negotiation down to affordable level, and in the case of an IVA some debt write off is possible.

Priority Debt Examples

Mortgage and Secured Loan

Failure to make payment to a secured loan, mortgage could lead to your lender repossessing your home or your landlord evicting you. A common mistake is that mortgage holders miss payments at the expense of unsecured debts as unsecured creditors can shout louder and some if payments are missed. An IVA or DMP can reduced your unsecured debt payments thus making your secured obligations affordable.

Council Tax Arrears

Council Tax arrears is a priority debt as the council can send bailiffs to your home, take payment directly from your wages/benefits, or in extreme cases apply for committal to prison.  Council tax is a an essential expenditure while arrears can be included as a creditor in IVA/DMP. See Council Tax Arrears for more advice.

Gas or Electricity Arrears

A supplier can cut off your supply if you fail to pay these bills. Current bills are an expenditure item in a DMP/IVA while arrears can be included as a creditor. Please see Gas and Electricity Payment Problems for full details of options.

TV Licence

You need to be covered by a valid TV License if you watch or record TV as it's being broadcast. This includes the use of devices such as a computer, laptop, iPad and mobile phone. It costs £145.50 for TV Licence. While not a debt, this is a priority as not having one can result in prosecution. Weekly and monthly payment plans are available while concessions and some exceptions apply. See tvlicensing.co.uk for full details.

Hire Purchase / Conditional Sale

If you do not keep to the repayment terms, then these items could be repossessed as you don't own them until all payment have been made. Therefore essential items are considered to be priority debt and can be included in an IVA/DMP as expenditure item. Essential items include goods required for basic domestic living for example a reasonable car or washing machine and items needed for work. See Hire Purchase and Conditional Sale Debt Advice for more information.

Income Tax / VAT / National Insurance Arrears

Evading payment means that bailiffs could be sent to your home or you could face imprisonment. If Her Majesty's Revenue and Custom (HMRC) has thinks there is little prospect in payment being forthcoming, then bankruptcy proceedings may follow. See Income Tax and VAT arrears for more information.

Magistrates Court Fines

Failure to pay the court fines could lead to bailiffs being sent to your home or imprisonment. The debt can also be deducted from your wages or benefits. Such fines can be included in IVA/DMP as an expenditure item, unless bailiffs have already entered your property and marked items for removal.  In which case,  the debt must settled under the courts terms or you will loose some of your possessions.

Maintenance Arrears

These is a serious priority debt as If you fail to maintain the payment levels determined by the CSA (Child support  agency), they can instruct your employer to make deductions directly from your wages or apply to magistrates court for a liability order. See Child Maintenance Payments for more information.