What's the difference between priority and non-priority debts?

The distinction between priority and non-priority debts is fundamental to managing debt effectively. Priority debts carry severe consequences for non-payment and must always be addressed before non-priority debts, even if a non-priority creditor is pressing harder for payment.

Priority debts include: mortgage or secured loan arrears (risk of repossession); rent arrears (risk of eviction); council tax arrears (risk of bailiff action and, in extreme cases, imprisonment); gas and electricity arrears (risk of disconnection); TV licence arrears (risk of prosecution); magistrates' court fines (risk of bailiff action, driving disqualification, or imprisonment); child maintenance arrears (risk of imprisonment); income tax and National Insurance (HMRC has significant enforcement powers including statutory demands and winding up); and HMRC VAT arrears.

Non-priority debts include: credit card debts; personal loans; overdrafts; store cards; catalogue debts; payday loans; water arrears (water cannot be disconnected for domestic consumers); and most unsecured debts. Creditors for these debts can pursue CCJs and subsequent enforcement, but cannot cause immediate loss of home, utilities, or liberty.

When allocating limited income between debts, always maintain payments on priority debts first. Contact non-priority creditors to explain your situation and offer reduced payments or a repayment plan. Many creditors will accept this, particularly if you have a Standard Financial Statement showing your income and expenses.

Seek free debt advice from Citizens Advice, StepChange, or the National Debtline if you are struggling to prioritise.