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:
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.
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.
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).