Which creditor takes priority when repaying debts?
October 10, 2017
When you owe money to a number of different creditors, it can be difficult to know who should take priority. To clarify which debts should be paid first, consider the consequences of failing to pay each one.
A good example is your rent or mortgage payments – failing to pay these could result in the repossession of your home, or eviction by the landlord. In the same way, if you don’t pay you gas and electricity bills you could find yourself living without heat and light.
Priority and non-priority payments
It’s likely that your creditors will contact you relentlessly for payment, so apart from mortgage, rent and energy bills, which other debts should you consider a priority? They include:
- Council tax bills
- Utility bills
- Income tax and National Insurance arrears
- TV licence
- Child maintenance payments
- Court fines
- Fixed penalty notices issued by the police
- Hire purchase payments
Non-priority debts can include:
- Unsecured personal loans
- Credit card, store card and catalogue payments
- Payday loans
- Bank overdrafts
- Water rates
- Benefits or tax credits overpayments
- Fixed penalty notices from the council
Dealing with priority creditors
Once you’ve established which creditors need to take priority, what can you do to ease your financial situation? It’s a good idea to contact each creditor individually to see if they’re willing to help. They may be able to offer a lower payment amount for a period of time, for example, or an extended overall term.
It’s also advisable to make notes of the dates and times that you call, the people you speak to and the outcome of each conversation, as the information might be needed at a later date. Once you’ve done all you can to negotiate lower payments for priority debts, you can contact unsecured creditors in the same way.
Seeking professional advice
Obtaining professional guidance is extremely beneficial in helping you escape a debt spiral. Approved money advisers will let you know about the debt relief procedures available in Scotland – depending on the gravity of the financial situation, the Debt Arrangement Scheme (DAS), Scottish trust deed, or sequestration may be the most suitable option.
If you need more advice on prioritising your debts, and taking action to prevent further financial decline, talk to one of our experts at Scotland Debt Solutions. We specialise in helping Scottish residents deal with unmanageable debt, and can arrange a free same-day meeting to quickly establish the best course of action – we operate from four offices around Scotland.
If your credit score has been affected by problem debt, you may be looking for ways to start rebuilding it and getting on with your financial future. Whether you are still struggling with your debt or have entered into an official debt management or insolvency procedure such as a Debt Arrangement Scheme (DAS), Trust Deed […]
If you’re worried that the council might take action against you for non-payment of council tax, entering into a Scottish trust deed can be a beneficial step. It stops legal action by all creditors included in the arrangement, and provides a ‘safe haven’ from which to regain control of your finances. As council tax arrears […]
A debt payment programme (DPP) remains on your credit file for six years, along with other default markers and court judgments that have been made against you. This can seriously affect your ability to borrow for this period of time, and longer. Even if you can secure borrowing, lenders are only likely to offer unfavourable […]
If you owe a debt of £5,000 or less, your creditor may send you a Simple Procedure Notice of Claim. This is a relatively new procedure that was brought in by the Scottish government and commenced on 28th November 2016 – their intention being to make it easier to resolve debt disputes. So if you’ve […]
A Bankruptcy Restriction Order may be made against you if it’s believed that you acted dishonestly, recklessly or unlawfully before you were made bankrupt, or during your bankruptcy. Your Trustee will inform the Accountant in Bankruptcy (AiB), and if their suspicions are upheld, a BRO of 2-15 years can be made depending on the seriousness […]
Debt payment programmes (DPPs) are an intrinsic part of the Debt Arrangement Scheme, which allows you to pay off unsecured debt at an affordable rate. If a debt payment programme is rejected by one or more creditors, the DAS Administrator can apply their discretion on whether to approve the plan, after using a test to […]