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 five offices around Scotland.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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