Prioritising your debts

Written by Chelsea Potter on 8 February 2016

When you are in debt and struggling to make ends meet, it can be easy to fall in the trap of missing payments. You have to pay all of your bills, there is no other way about it, but if you can’t afford to cover the cost of your outgoings, it is important to pay certain bills ahead of others.

When you are struggling to make all of your payments, you need to prioritise your debts. Priority debts are those which come with severe consequences if you fail to meet your payments, for example failure to pay your rent could lead to you being left homeless. In contrast missing non-priority debts, while still important to pay, won’t affect you too much in the short term. For example, if you miss your cable bill your service will be discontinued. This short term consequence won’t have much effect on you, at least not when you compare the effects of not paying your utility bills.

Organising your debts

If you are struggling to manage your finances then the first thing you should do is sit down and work out which debts are priority. Work out the consequences of missed payments and make sure you pay the bills that have severe consequences. Priority debts normally include:

  • Mortgage payments or rent payments
  • Utility bills – gas, electricity, water
  • Council tax – while it may not seem important it could lead to a Summary Warrant being issued against you.
  • TV license – failure to pay your TV license could lead to a court fine.
  • Court demanded payments
  • Child maintenance
  • Hire purchase payments for essential goods like a vehicle. Failure to pay could lead to the loss of your goods.

Non-priority debts include:

  • Unsecured debts – these are debts that are not secured against your property. For example, bank loans and credit cards
  • Loans borrowed from friends and family
  • Catalogue debts
  • Payday loans

While non-priority debts are less important to pay, it is still important you recognise them and communicate with your creditors. If you fail to make any repayments, then your creditors could still take you to court to obtain a decree. 

Managing your budget

Once you know which debts are vital to pay, you need to sit down and work out your budget. How much do you have left once your priority debts have been paid? If you have priority debts in arrears you should use any surplus income to pay this back immediately. If you are up to date with your priority debts you can look at repaying your non-priority debts.

If you are struggling to pay your debts, it is important you communicate with your creditors. Don’t ignore them and get yourself deeper in debt, try and negotiate your payment amounts and ask for more time to meet certain payments. If you explain you’re struggling your creditors might be more flexible.

If, however, your debts have already got out of control and you are worried about your finances, don’t suffer in silence. The longer you leave and avoid a problem, the deeper it will worsen. Get in touch with a free debt advice provider, like PayPlan, and find out about your options. There are many debt solutions available to suit various circumstances and chances are, there are solutions that could help you sort out your debt problems. At PayPlan we offer free, no obligation, debt advice and we will discuss all your options with you so you can choose the best fit for you. If you need help, ask, it doesn’t cost anything but it could change your circumstances.

Filed under Debt Management Tips

This article was checked and deemed to be correct as at the above publication date, but please be aware that some things may have changed between then and now. So please don't rely on any of this information as a statement of fact, especially if the article was published some time ago.

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