Which Creditors Should Be Paid First When Repaying Personal Debts?

January 4, 2018

Chances are that you will have several different bills that need to be paid each month, but your circumstances may mean that you are no longer able to pay them all. If your debts are mounting and you are struggling to make all of your monthly payments, what should you do?

In this situation there are some debts that you should prioritise over others, usually because the consequences of not paying these are far more serious than for other debts. However we would always recommend contacting a debt management professional such as Northern Ireland Debt Solutions, as soon as you start feeling the pressure build. Facing up to the problem sooner rather than later will give you many more options and could allow you to manage your debt much more successfully.

So which debts should you prioritise and what are the potential consequences for not doing so?

In Northern Ireland priority debts could include:

  • Mortgage or other loan secured on your home – non-payment could result in repossession of your home.
  • Rent – non-payment could result in eviction from your home.
  • Rates – non-payment could result in the amount owed being recovered from the seizure of goods from your home, directly from your wage or bank account, a debt being secured against your home or enforced bankruptcy.
  • Criminal Fine – if the fine relates to a vehicle offense then the vehicle could be clamped or towed, non-payments of other criminal fines could result in money being taken from your wage, benefits or bank account, or imprisonment.
  • Child Maintenance Arrears – non-payment could result in goods being taken from your home, money recovered from your wages, bank account or benefits, the debt being secured on your home or in the most serious cases imprisonment.
  • Money Judgement – non-payment can result in the Enforcement of Judgement Office sanctioning goods to be taken from your home, or the debt to be secured against it. Money could also be taken directly from your wage or your bank account
  • Tax, VAT or National Insurance – non-payment could result in your PAYE tax code being adjusted to collect the amount owed through higher tax rates, goods could be seized from your home, money taken directly from your bank account or in the most serious cases enforced bankruptcy.
  • Gas or Electricity Bill – non-payment could result in the disconnection of your supply, a money judgement being raised against you or money being taken directly from your benefits.
  • Water Bill –if you don’t pay your water bill money could be deducted from your benefits, but your supply cannot legally be cut off.
  • Telephone Bill – non-payment can result in the disconnection of your phone and/or a money judgement being raised.
  • Hire Purchase Agreement – failure to make your repayments can result in the repossession of the goods and/or a money judgement being raised against you.

You may also have a number of other debts such as credit cards and store cards, but these are known as unsecured debts, and even though these still need to be repaid, the consequences for not doing so are less severe than for priority debts. If you are struggling to make payments on your unsecured debts then a good first step is to contact your creditor directly and explain that you will be unable to make repayments for a while, until you have got on top of your priority debts. They may be able to arrange a payment holiday to give you the breathing space that you need.

Contact Northern Ireland Debt Solutions on 0800 470 0461 if you feel that you are struggling to keep in control of your debts. There are a number of options that we can discuss with you and can help you to prioritise your repayments, whilst negotiating more favourable payment terms with your creditors.

Lawrence O'Hara

Insolvency Adviser

Tel: 028 2132 6269

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