Need help? Ask a confidential question.
Talking Money can help you with debt issues by providing free, independent debt and energy advice and financial education. They will respond to your questions directly by contacting you via email or phone.Ask a confidential question >>
Understanding Different Types of Debt
It is important that you understand the difference between priority and non priority debt and understand which ones you must deal with first and how to deal with them.
If you find yourself in debt, I make sure that you seek advice and do not ignore the problem as it will only get worse.
Dealing with priority debts
The most important debts aren't necessarily the biggest ones. Priority debts are ones where serious action can be taken against you if you don't pay what you owe.
Priority debt tend to be:
- Mortgages and secured loans
- Tax, National Insurance and VAT
- Tax credits overpayments
- Council Tax
- Utility bills
- Loan shark loans
- Hire purchase (HP) debt
- Other priority debts
A court could use bailiffs to come into your home and take your goods away if you have unpaid:
- Business Rates
- magistrates’ court fines
- maintenance and child support payments
Your goods would be sold to pay what's owed. If you still owe money after this, it's possible you might be sent to prison.
Non-priority or credit debts
You may not lose your home or go to prison for not paying 'non-priority' or credit debts. However, you can still be taken to County Court and ordered to pay what you owe - often with extra costs on top. Examples of non-priority debts include:
- credit card or store card arrears
- catalogue debts
- water rates arrears
- bank overdrafts and loans
- personal loans with finance companies
- money borrowed from friends or family
It is important to plan your way out of debt and understand The emotional effects of debt.