Creditors – What can they do?
It is important to divide your debts into priority and non-priority debts. Why? – Because you need to understand which debts need to be paid first as a result of the potential consequences of not doing so. Many people get into difficulty because they pay the wrong creditors first.
Priority debts are debts that could result in your losing your home or an essential supply, if they are not paid
Below is a list of debts that are usually regarded as priority, and why they are a priority.
- Rent or Mortgage and secured loans – Lender or landlord can repossess the home
- Council Tax – Council have quite wide recovery options – they can use bailiffs, obtain payment from ‘attachment of earnings or benefits’ or, as an extreme, apply for your committal to prison
- Electricity and Gas – The Supplier may obtain permission to disconnect supply
- Magistrates’ Court Fines – Bailiffs can be sent to collect unpaid fines, refusal to pay can result in imprisonment. Re Maintenance arrears/CSA, Bailiffs can be instructed or there could be deduction from earnings, or committal to prison
- HP/conditional sale, rented and hired goods – Goods may be repossessed
- Business Rent – Repossession of premises
- Business Rates – Bailiffs, committal to prison
- Income Tax/VAT – Bailiffs, committal to prison (for evading payment)
- TV Licence – Fine of up to £1000
Other items to consider
- Water charges – Water companies may no longer disconnect supplies to enforce payment, but payment of water bills must still be regarded as an essential.
- County court orders – If you have been ordered to pay a debt via a county court order. However courts will take into account someone’s ability to pay a debt. If you cannot afford to pay, see the section on county court judgments for how to deal with this.
- Insurance (especially of your car and home) – Car insurance has to be paid by law, but insuring your home can be overlooked as an essential item; if you are uninsured however, you could lose everything through fire or theft.
Always remember to check if you have any insurance policies (payment protection policies) that will help you to pay your mortgage or other form of borrowing in the event of illness, disability, redundancy etc.
