How to Prioritise the Payment of Debts
Tackle Money issues, Council Tax, Secured Debt, Unsecured Debt
Feb 10, 2009
Prioritising the payment of debts is one of the most important things someone with money issues must do. Unfortunately, those with money issues tend to pay small, unsecured debts before secured debts. Some even miss council tax payments and face imprisonment. Organising the payment of debts is important as it helps those struggling with personal debt avoid house repossession and imprisonment.
Council Tax Payments
Although they aren't a secured debt, ensuring that council tax payments are made punctually is an absolute priority. If someone with money issues fails to pay up on the date the payment is due or contact the council to tell them when a payment can be expected, they will issue a reminder, requesting payment of any council tax arrears within 7 days.
Should council tax not be paid within a further 7 days, the local council can ask the Magistrates Court to issue a liability order. This allows them to garnish council tax arrears directly from wages or benefits or use the services of the court bailiff. The Magistrates Court can send people to prison for non-payment.
If money problems have occurred as a result of redundancy or ill health, check to see if council tax is still payable. Others may wish to check that they are in the correct council tax band as this could help alleviate money issues and help reduce personal debt. Council tax arrears cannot be written off by a debt solution.
Secured Debts and Rent
Payments of debts that are secured on the family home are the next priority. Secured debts include the mortgage and any loan registered at the Land Registry as a second charge. This includes homeowner loans and secured debt consolidation loans. The payment of debts that are secured is important as it can lead to house repossession. A priority debt for non home owners is the rent as it can result in eviction.
Household Bills
The payment of debts is important, but so is covering critical household bills, such as food and heating. Whilst it isn't possible for water to be cut-off, this isn't the case for gas and electricity. If struggling to pay the gas and electricity on time, call the utility provider and offer a nominal payment.
Unsecured debts
The payment of debts that are classified as unsecured debts, whilst still important, should be regarded as a non priority debt. Unsecured debts include: credit card debt, unsecured loans, personal overdrafts, mobile phone bills, catalogue debts and store cards.
Those with money problems should see if it is possible to pay creditors a reduced monthly repayment. Alternatively, people with unsecured debts could pursue a debt solution, such as a debt management plan or an Individual Voluntary Arrangement.
Before making a decision regarding the payment of debts, make a list of all incomes and expenditures. A person with debt problems should prioritise personal debts in the order outlined above. Unsecured debts should be tackled with a debt solution should there be an income shortfall.
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