Creditors and their Rights

Introduction

It is important to divide your debts into priority and non-priority debts. 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.

Priority Item & Reason for Priority

• Rent or Mortgage and secured loans - Lender or landlord can repossess the home
• Council Tax - Council can use bailiffs, attach benefit or wages and apply for committal to prison
• Electricity and Gas - 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. Maintenance arrears/CSA Bailiffs or 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, 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.