Ray Neal, a debt advisor at the charity StepChange, explains what debts should be paid first if you’re struggling financially, and what to do if you’re finding it difficult to pay your debts.

What debts should you pay first?

Deciding which debts require more urgency is one of the most important parts of dealing with them, and they can be roughly divided into 'high priority' and 'low priority'.

High priority debts are those arrears that can cause extra hardship or difficulty if they are not dealt with. They include:

• rent or mortgage
• council tax
• any debt with legal action such as a county court judgment (CCJ)
• fines
• utility bills
• anything secured on goods or property

Debts like catalogues, credit cards and personal loans tend to escalate slower than these and could be easily manageable within a debt plan.

Rent and mortgage are usually of the highest importance (although individual circumstances can differ), as falling behind with these can lead to eviction or even homelessness in extreme circumstances. Other debts secured against property can be equally important for the exact same reason.

Council tax is often the next highest priority debt people deal with, as this can escalate to legal action and visits from enforcement agents faster when compared to most other debts.

In addition, some fines and penalties can increase dramatically in cost if not paid immediately, so it's usually advisable to pay these off as soon as possible.

What can I do if I’m struggling to pay my debts?

Learning to prioritise your debt payments can help in the short term, but it can also help you to avoid financial problems in the future.

The first step towards prioritising is to make a realistic budget so that any ongoing bills are covered. Only paying towards any increasing arrears might mean the weekly or monthly bill isn’t being paid for. A budget should include all expenditure that need to be covered to make sure the amount left over to cover debts and arrears is realistic.

However, if you’ve been worrying about money more so than usual, then that might be a sign that you need some additional help.

You can get help prioritising debts and working out a budget from debt advice agencies like StepChange and the Citizen's Advice Bureau, who can see if a few small changes can make those payments less difficult, or if you’re in need of a dedicated debt solution instead.

About the author

Ray Neal is a debt advisor at StepChange, a charity who offer the widest range of debt help and solutions of any charity in the UK. Their free, impartial debt advice service is tailored help to each client’s circumstance and figure out the best way forward.

See also

What types of debt can be included in a DRO, an IVA and bankruptcy?

A brief guide to debt relief orders

What is an IVA and is it right for you?

What restrictions are there during bankruptcy?

Images

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Publication date

20 May 2024

Any opinion expressed in this article is that of the author and the author alone, and does not necessarily represent that of The Gazette.