Step 3 Identify your priority debts

Debts get worse if they’re ignored. If you’re finding it hard to meet payments, there are ways to address the problem. After identifying your disposable income , the next step is prioritising your financial commitments.

List any debts or credit agreements you have as priority or non-priority. This will help you see what needs to be paid first.

Debts are classed as a priority if failing to pay would result in serious action – such as your home being repossessed. These may include unpaid rent, tax, utility bills, fines or hire purchase agreements. Once you’ve identified a priority debt, act immediately. Contact your creditors to tell them about your current financial situation.

Non-priority debts are less urgent because the consequences are likely to be less serious. Only try to pay these after you’ve dealt with your priority debts. Debt collection agencies may contact you on behalf of your creditors. Remember, these agencies don’t have the same power as bailiffs.

Keeping track of your debts will help you negotiate with your creditors if you need to.

Priority (urgent) debts

If it has become difficult to pay all of your creditors, it may be useful to make a list of all your financial commitments. It’s also a good idea to contact your creditors as soon as possible to tell them about your current circumstances. Any credit agreements or debts you have are split into two groups: priority and non-priority.

Priority debts are the most urgent debts you need to pay. You should address these debts as soon as possible. Otherwise, serious action may be taken, for example, your home could be repossessed if you don’t meet your mortgage repayments. Some of the organisations listed in this PDF about sources of advice for financial issues [PDF, 349Kb] can help you negotiate your priority debts with creditors. 

If you’re finding it hard to pay your bills, don’t ignore the problem. Debts quickly get worse if they’re left. It’s especially important to deal with any priority debts, such as:

Mortgage/secured loan

If mortgage payments aren’t made for a few months, your property or home may be repossessed. However, there are schemes designed to help those struggling with mortgage payments. Visit GOV.UK’s website and search for ‘mortgages’ for more information.

Rent arrears (unpaid rent)

You could be evicted after eight weeks if you don’t pay your rent. If you’ve made an application for Housing Benefit, it’s important to make sure your landlord is aware of this.

Council tax in England, Scotland and Wales

If you don’t pay your council tax, a bailiff (a person legally authorised to recover a debt, known as a sheriff officer in Scotland) may be given the right to seize your possessions. Deductions may be taken from your income or, eventually, more serious action may be taken.

Rates in Northern Ireland

If you don’t pay your rates, you could be taken to court by the Land & Property Services. If you still don’t pay, they could take more serious action, including deductions from your wages or a charge being put against your property.

Unpaid gas or electricity bills

Your gas and/or electricity may be disconnected if you don’t pay these debts, but explaining your circumstances to your energy supplier may stop this from happening. If you’re ‘vulnerable’ (for reasons of age, health, disability or severe financial insecurity) and are unable to pay your bills, most of the major energy suppliers will not disconnect your supply – but you have to let them know that you’re classed as ‘vulnerable’.

Fines, maintenance and compensation orders

You may face a magistrates court (sheriff’s court in Scotland) fine for failing to pay these.

TV license

If unpaid, you may face a magistrates’ court fine, and a bailiff may be given the right to seize your possessions. In Scotland these are enforced through the sheriff court. TAX and VAT.

If you don’t pay these, the government may recover the money you owe using commercial debt collectors or by taking possession of your goods (bailiff/sheriff officer action), or they may take you to court. 

Hire purchase and conditional sale agreements

Items you have purchased using these may be repossessed if you don’t keep up with the agreed payments.

Parking penalties

Civil action could be taken and your vehicle could be seized. These penalties should be treated as priority debts because of the level of action that can be taken.

Once you have identified a priority debt, you should take immediate action. Contact your creditors to make them aware of your current financial situation. If you have no disposable income available to make an offer of payment and are still in the process of sorting out your finances, you could request that no further action is taken until you have had a chance to do this (see Step 4: Negotiate with your creditors for a sample of a holding letter). It’s important that you seek appropriate advice during this process to ensure you maximise your or your family’s income (see Step 1: Increase your income). 

Non-priority debts

Non-priority debts are less urgent than priority debts. You should still try to pay them whenever you can, but only after you’ve paid any priority debts. The consequences of not paying non-priority debts are likely to be less serious.

Debt collection agencies

Creditors can employ debt collection agencies to collect debt on their behalf, or they may sell your debt to these agencies. This means debt collection agencies may contact you about money you originally owed elsewhere. Collection agencies can also sell your debts to one another, which can make it even more confusing for you. It can be difficult, but you need to keep track of who each debt is owed to.

It’s important to remember that debt collection agencies are not court officials and don’t have the same power as bailiffs. It’s important to remember these debts remain non-priority. Some of these agencies can make you feel threatened. They may even be connected to a firm of solicitors, which makes them sound very official. This doesn’t give the agencies any extra authority or make their debts a higher priority. Whatever they want you to believe, these agencies have no greater powers than the original creditor.

Be careful to treat all of your creditors the same. It’s essential to pay them all a fair share from the money you have available. Don’t make a big payment to just one or two creditors. If any creditor feels they are being treated unfairly, they may be less ready to make an agreement with you.

You can use the table below to make a list of your non-priority debts. Remember to update it regularly. Amounts can go down if you make regular payments that are large enough. Likewise, your debt can actually go up if you make smaller payments (eg if they don’t cover the accruing interest) if the interest rate increases or if you’re charged for late payments.

County Court Judgements

Many creditors may threaten county court action if you fall behind with payments and are unable to pay the suggested amounts. If the debt is pursued through the county court, the financial statement will be very useful for you to identify your available income.

In most cases you won’t have to attend a court hearing and it will be dealt with through the post. Most judges are quite sympathetic, and you will not be asked to pay more than you can afford. If you have completed your budget accurately, the court will usually write to you and ask you to pay what you have offered.

Keeping track of your debts

It’s important to keep track of your debts and to prioritise them depending on whether they’re priority or non-priority. You might find it helpful to use a table like the one oppositebelow. You could start by jotting down all your debts, then put them in order of importance so you can clearly see which priority debts should be paid first. 

Debt (original creditor)Type of debt (priority or non-priority)Amount owedAgreed payment (weekly or monthly)Transferred to (if your original debt is sold on to collection agencies)

When you have created a financial statement you can follow the next step, negotiating with your creditors.

Back to Managing debt and borrowing

Debt and borrowing overview

Living with cancer can bring extra expenses. Learn how to manage your debts using a clear step-by-step process.

Step 1: Increase your income

Increasing your income is the first step to managing your debts. Check your entitlement to benefits and insurance payouts.

Step 2: Reduce your expenses

Once you have made sure you have as much money coming in as possible, there are ways you can reduce your expenses.