If you’re juggling payments between multiple creditors, and struggling to make ends meet, it can be difficult to decide which ones to prioritise. To determine this, you should break them up into the following:

• > Priority Debts

• > Emergency Debts

• > Non-priority Debts

Priority debts are those expenses which, if left unpaid, carry serious consequences. For example, council tax is classed as a priority debt because one of the penalties of non-payment can be prison. Similarly, household bills are treated as a priority because failing to pay these can result in your heating or electricity being cut off.

In contrast, non-priority debts are those where either non-payment carries lesser consequences or serious ramifications in the future. Generally speaking, if you can’t pay what you owe, you should have a few months to resolve the issue. These cover such debts as credit cards and bank overdrafts.

Emergency debts are to be treated the same as priority debts. These could be previously non-priority matters where a period of non-payment has now resulted in imminent action. For example, a credit card provider might have passed your details to a collection agency.

During debt prioritisation, you will also need to determine which of your debts are unsecured and secured.

Secured debts are generally classed as a priority because the consequences of non-payment could put your assets at risk. An example of this would be car finance. If this expense is unpaid, the vehicle could be seized. Similarly, in the case of a mortgage, your home could be repossessed.

Unsecured debts typically cover such expenses as store cards and credit cards. As assets aren’t placed against the debt, the consequences of failing to pay these are generally less serious. For example, legal action and additional charges. In short, secured debts should typically be cleared before the unsecured ones.

We deal with numerous types of debt every day – too many to list here. If you’re struggling to pay something not on this list, drop us a line anyway. Chances are, we’ve dealt with it before.