Getting Debt Priorities Straight

If you're being chased by any number of creditors it's time for an action plan starting with prioritising your debts. But what are priority debts?

If you only had the money to pay one of two bills - council tax or credit card - which one would you pay? Hopefully you'd opt for the council tax bill - the reason being that you can get sent to prison for non-payment of council tax whereas you can't for defaulting on your credit card.

Council tax, therefore, is a priority debt - the sort you need to pay attention to first because the consequences of not paying them can be severe.

It's no surprise then that secondary creditors such as credit card companies, usually pester you for payment far more vociferously than priority creditors who have more in the way of power. As a result people are often more tempted to try and pay off the loudest creditors first.

Examples of priority debts include:

• The mortgage - the lender could ask the court to make an order to evict you and sell your home;
  
  
• The rent - the landlord could get a court order to evict you;
  
  
• Council Tax - you could be sent to prison;
  
  
• Income Tax - you could be made bankrupt;
  
  
• Fuel bills - your gas or electricity could be cut off;
  
  
• Phone bills - the phone could be cut off

Examples of secondary debts include:

• Unsecured loans
  
  
• Credit Cards
  
  
• Hire Purchase Agreements
  
  
• Store Cards
  
  
• Catalogues and other Mail Order debts

Obviously these secondary creditors can't be ignored but there's usually more flexibility to negotiate if you get into trouble. Organisations such as the Consumer Credit Counselling Service and Payplan can negotiate with your creditors on your behalf and help you to set up a debt management plan.

Note, however, that anyone to whom you owe money can make you bankrupt if you owe them more than £750 so even secondary creditors need to be dealt with!