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Types of debt
Priority debts
Priority debts are debts owed to creditors who can
take the strongest legal actions against you if you do not pay.
It is not the size of the debt that makes it a priority, but what
the creditors can do to recover their money.
Priority debts are:
- mortgage arrears - the mortgage lender can take court action
for possession of your home
- rent arrears - the landlord can evict you if you have rent arrears
- income tax and VAT - you can be made bankrupt or imprisoned
for non-payment of income tax or VAT
- fines, such as magistrates court fines for traffic offences.
If these are not paid, the court can use bailiffs to repossess
your goods. If, after this, you still have arrears unpaid, you
can be sent to prison
- maintenance, child support or, council tax or rates. If these
are not paid, a court can use bailiffs to repossess your goods.
If, after this, you still have arrears unpaid, you can be sent
to prison
- fuel debts - if these are not paid you can have your fuel supply
disconnected
- hire purchase (sometimes called 'conditional sale') will be
a priority debt if it is for an essential item, for example, if
you have bought a car on HP and need the car to go to work.
If you have any of these debts, you must deal with
them before you offer to repay any of your non-priority debts.
Non-priority debts
Examples of non-priority debts are:
- credit card and store card arrears
- catalogue arrears
- bank overdrafts and loans
- benefits overpayments
- hire purchase (sometimes called 'conditional sale') will be
a non-priority debt if it is for goods which are not essential
to you, for example, a television bought on HP
- money borrowed from family or friends.
You cannot be imprisoned for not paying non-priority
debts. You are unlikely to lose your home or your essential goods.
However, if you make no offers to pay, without explaining why,
the creditors will take you to court. If you still fail to pay
when the court has ordered it, the creditors can take further
action - for example, they can get another court order allowing
them to send bailiffs in.
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