Owe someone money?
To deal with a debt problem you need to:
- Sort out how much money you owe
- Work out which are the most urgent debts for you to pay off
- Work out if you’ve got any money to pay your debts off and, if so, how much
- Deal with the most urgent debts as a matter of priority
- Look at your options for dealing with the less urgent debts and work out how to pay them off
- Contact your creditors and make arrangements to pay back what you owe
- Work out your options if you don’t have enough money to pay off all your debts
You need to make a list of all the people and companies you owe money to and find out the following information for each debt:
- The name and address of the creditor
- The account or reference number
- A copy of the original loan agreement you signed
- The amount and any interest owed
Some debts are more urgent than others because the consequences of not paying them can be serious. These are known as priority debts. Once you have a list of people you owe you need to work out which are the most urgent.
The following are classed as priority debts:
- Rent or mortgage arrears. If you don’t pay these, you could lose your home
- Gas and electricity arrears. If you don’t pay these, you can have your supply disconnected
- Council tax arrears. If you don’t pay these, a court can use bailiffs to take your goods. If, after this, you still have arrears unpaid, you can be sent to prison
- Court fines such as magistrates’ court fines for traffic offences. If you don’t pay these, the court can use bailiffs to take your goods. If, after this, you still have arrears unpaid, you can be sent to prison
- Arrears of maintenance payable to an ex-partner or children. This includes Child Support you owe to the Child Support Agency. If you don’t pay these, a court can use bailiffs to take your goods. If, after this, you still have arrears unpaid, you can be sent to prison
- Income tax or VAT arrears. You can be sent to prison for non-payment of income tax or VAT
- TV licence or TV licence arrears. It’s a criminal offence to use a television without a licence. You could be fined
Non-priority debts include:
- Benefits overpayments
- Credit debts such as overdrafts, loans hire purchase, credit card accounts and catalogues
- Water and sewerage charges – you can’t be cut off for water debts
- Student loans
- Money borrowed from friends or family
- Parking penalties issues by local authorities
What do you do next?
Once you’ve worked out how much money you owe and sorted your debts into urgent and less urgent ones, you’ll need to work out if you’ve got enough money to pay them off.
If you have some money left over when you have worked out your budget you should pay off priority debts first.
You should then pay off non-priority debts as the company could still take legal action against you for non-payment of debt.
If you have no money and are struggling to pay off your debts you should contact a debt advice service to go through other options that may be available to you.
Do not ignore the problem
Talk to one of the many organisations that can provide you with advice and support e.g. Citizens Advice or National Debtline. Or talk to one of our Tenancy Support Officers, contact us.