Before you start step 4 you should:
- know exactly what you owe;
- be claiming all the benefits you are entitled to; and
- have tried to cut down on your spending as much as you can.
Some of your debts are known as ‘priority debts’ and you should pay them before you pay any other debts. If you don’t, you could go to prison, have your services such as gas or electricity cut off or you could lose your home.
Priority debts are:
- Rent or Mortgage;
- Council Tax;
- Gas or Electricity;
- Hire Purchase;
- Child Maintenance
Make arrangements to pay your priority debts first before you offer to pay non-priority creditors.
Non-priority or ‘secondary’ debts are much less important because the creditors you cannot be sent to prison for not paying non-priority debts.
Your non-priority debts include:
- unsecured loans;
- store cards;
- credit cards;
- credit agreements (for example a loan for a car);
- money you owe for goods you’ve ordered from catalogues;
- home collected credit like Provident or Shopacheck (companies that provide loans or goods at a high rate of interest).