Step 1 - Make a complete list of your debts
Divide them into two groups - priority and non-priority debts. Although we've included the most common types of debt our lists aren't totally comprehensive, so if you want any clarification for your own situation contact your local CAB.
Priority debts are debts owed to creditors who can take the strongest legal actions against you if you do not pay, e.g. prison, re-possession of your home etc. Examples are:
- mortgage, secured loans, rent arrears on your current home
- income tax or VAT
- fines, such as magistrates court fines
- County Court judgements
- child support or maintenance
- council tax or rates
- fuel debts with your current suppliers
- hire purchase will be a priority debt if it is for an essential item, for example, if you have bought a car on HP and you need the car for work.
- benefits overpayments if you are still receiving those benefits, albeit at a lower rate.
- Social Fund loans
- loans from family or friends if they now have priority debts as a result of lending money to you.
You must make arrangements to pay off your priority debts before you make any offers or agreements for your non-priority debts.
Examples of non-priority debts are:
- store and credit card accounts
- catalogue accounts
- bank overdrafts and unsecured loans
- benefits overpayments if you are no longer receiving benefits
- hire purchase agreements for non-essential items
- rent arrears to a previous landlord
- fuel debts to previous suppliers
- money borrowed from family or friends, in some circumstances
You can't be imprisoned for not paying non-priority debts. You are unlikely to lose your home or your essential belongings. However, if you don't pay or don't make any offers to pay, without explaining why, the creditors could take you to court and eventually bailiffs would be sent in and could take your possessions, or you could have a charge put on your property.
If you wish, you can use our Excel Creditor Summary Sheet for this. Print it and fill it in, or record the information on your computer.
Note: The people and organisations you owe money to are called your "Creditors"