Which Debts Should Take Priority?
People suffering debt problems will often have built up several individual debts before situation gets too serious, and when they have trouble meeting their commitments it can be difficult to decide which debts have the highest priority for repayment. Whilst it’s obviously preferable to keep up to date on all your debts, in the real world sometimes choices have to be made, and some agreements broken. So which debts should you pay the most attention to?
The most vital debts to service are those which could result in you losing your home or otherwise finding it very difficult to live. This of course means your mortgage or rent arrears, and any loans secured on your home, but also includes utility bills and the like which could see your energy or water cut off if you don’t pay.
Next, some debts could result in severe consequences if unpaid, even including imprisonment. These are generally debts owed to the government in one way or another – council tax, income tax, court fines and the like. These debts should be very high on your list of priorities, as the state is indefatigable when it comes to getting its dues.
The most common type of debt is unsecured – such as credit card balances, overdrafts and so on. While the consequences of not paying these debts are certainly serious, they can’t result in imprisonment. It’s still possible to lose your home through these debts, but not directly – only as a result of bankruptcy. Court orders will need to be obtained before any bailiff visits or other recovery action is carried out, giving ample opportunity to come to an agreement with your creditors before things get to this stage.
In summary, when deciding which debts take priority ask yourself two questions: could not paying land me in jail, or could it lead to me being homeless? If the answer to either is ‘yes’, then these debts are the ones to focus your energy on paying off.
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