Types of Debts

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Debts

- Types of debt

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Priority debts

Priority debts are debts owed to creditors who can take the strongest legal actions against you if you do not pay. It is not the size of the debt that makes it a priority, but what the creditors can do to recover their money.

Priority debts are:

mortgage arrears - the mortgage lender can take court action for possession of your home
rent arrears - the landlord can evict you if you have rent arrears
income tax and VAT - you can be made bankrupt or imprisoned for non-payment of income tax or VAT
fines, such as magistrates court fines for traffic offences. If these are not paid, the court can use bailiffs to repossess your goods. If, after this, you still have arrears unpaid, you can be sent to prison
maintenance, child support or, council tax or rates. If these are not paid, a court can use bailiffs to repossess your goods. If, after this, you still have arrears unpaid, you can be sent to prison
fuel debts - if these are not paid you can have your fuel supply disconnected
hire purchase (sometimes called 'conditional sale') will be a priority debt if it is for an essential item, for example, if you have bought a car on HP and need the car to go to work.

If you have any of these debts, you must deal with them before you offer to repay any of your non-priority debts.

Non-priority debts

Examples of non-priority debts are:

credit card and store card arrears
catalogue arrears
bank overdrafts and loans
benefits overpayments
hire purchase (sometimes called 'conditional sale') will be a non-priority debt if it is for goods which are not essential to you, for example, a television bought on HP
money borrowed from family or friends.

You cannot be imprisoned for not paying non-priority debts. You are unlikely to lose your home or your essential goods. However, if you make no offers to pay, without explaining why, the creditors will take you to court. If you still fail to pay when the court has ordered it, the creditors can take further action - for example, they can get another court order allowing them to send bailiffs in.