When looking at your list of debts, you may think that the largest debts should be your priority. However, this is not the case. Your first priority is to pay the debts that will keep a roof over your head, and then the debts that will keep you out of court or keep any essential utilities connected. The priority list runs as follows:
- Mortgage or rent.
- Any debts that are secured on your house (for instance, second mortgages, secured loans).
- Any essential hire purchase items that could be in danger of being repossessed (for instance, your car, if you need it to get to work).
- Council Tax, otherwise you will have to go to Court.
- Electricity and gas to avoid disconnection.
- Water - although this is a lower priority because the water companies are not allowed by law to disconnect domestic consumers.
- Any other debts (unsecured personal loans, credit and store cards) which may end up in court and ultimately with the bailiffs.
You should now be able to prioritise the order of repayment from your debt list. It is quite possible that several of them, especially the larger ones, can be deferred for a long time, or even written off entirely.
Nobody is likely to want to take you to court over debts lower than £200, as it costs more than that in time and fees for arranging a hearing. However, if anybody refuses your offer of monthly repayment and threatens court action, do not worry. As long as you have prepared a reasonable and fair financial statement, you will only be ordered to pay whatever it is you originally offered in the first place.
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