Priority Debts vs Non-Priority Debts: Which Bills to Pay First

When you’re struggling with debt, prioritising which bills to pay first can be daunting. Understanding the distinction between priority debts and non-priority debts is crucial. In the UK, some debts are considered priority because the consequences of not paying them can be severe. In this article, we break down priority debts, non-priority debts, and the strategies you can use to manage them effectively.

What Are Priority Debts?

Priority debts are those that carry serious consequences if left unpaid. This can include losing your home, having essential services cut off, or facing legal action. Common priority debts in the UK include:

• Mortgage or Rent Arrears: Falling behind could lead to eviction or repossession. For example, if you miss multiple mortgage payments, your lender could initiate repossession proceedings, potentially leaving you without a home.
• Council Tax: Non-payment can result in bailiff action or even imprisonment. Local councils can apply for a liability order, which allows them to collect the debt through bailiffs or deduct it from your wages.
• Utility Bills: Unpaid gas and electricity bills could result in your supply being disconnected. In extreme cases, utility companies might install a prepayment meter, which could be more costly in the long run.
• Child Maintenance: Failure to pay can lead to court action, impacting your credit score and more. The Child Maintenance Service has the power to take money directly from your wages or bank account.
• Income Tax, National Insurance, and VAT: Non-payment can lead to severe penalties from HM Revenue & Customs. In some cases, HMRC can take enforcement action such as issuing a distraint order, which allows them to seize goods to cover the debt.
• TV Licence: Watching TV without a valid licence can result in fines. If unpaid, these fines can escalate, potentially leading to a court summons.

Consequences of Ignoring Priority Debts

Ignoring priority debts can result in severe legal and financial consequences. For example, not paying your mortgage could lead to the loss of your home, while ignoring council tax bills might result in court summons and additional costs. A case scenario could involve a family who, after ignoring their council tax, receives a court summons, followed by bailiffs visiting their home. This not only increases their financial burden but also causes significant stress and anxiety.

How to Address Priority Debts

Once you’ve identified your priority debts, it’s important to address them immediately. Contact your creditors to explain your financial situation and negotiate a payment plan. For instance, if facing mortgage arrears, contacting your lender to discuss options like extending the term of your loan or switching to an interest-only mortgage temporarily can be beneficial. Seeking professional advice from debt advisers can also help in creating a manageable solution. Debt advisers can assist in negotiating with creditors and may suggest solutions like a Debt Management Plan (DMP) or Individual Voluntary Arrangement (IVA) if appropriate.

Understanding Non-Priority Debts

Non-priority debts, while still important, don’t carry the immediate severe consequences of priority debts. These typically include:

• Credit Card Debts
• Personal Loans
• Store Cards
• Payday Loans
• Overdrafts

Managing Non-Priority Debts

Although the consequences for non-priority debts are not as immediate, these debts can still negatively impact your credit score and accumulate interest. Consider creating a debt management plan (DMP) to organise repayments. A realistic example would be an individual juggling multiple credit card debts who consolidates them into a single DMP, allowing for one manageable monthly payment. Remember, a DMP is not legally binding, and interest might not be frozen, so it’s crucial to discuss your options with a debt adviser. Additionally, exploring balance transfer credit cards with 0% interest offers can help manage credit card debts more effectively.

Debt Solutions Available in the UK

When dealing with debt, there are several solutions available depending on your circumstances. Here’s a closer look at some of them:

Debt Relief Order (DRO)

A DRO is suitable for those with low income and minimal assets. As of June 2026, the key criteria include:

• Maximum debt: £50,000
• Maximum spare income: less than £75/month
• Maximum assets: less than £2,000
• Vehicle: must not own a vehicle worth £4,000 or more
• Homeowner: Cannot own your home

The DRO process lasts 12 months, after which your debts are written off. It’s free of charge and must be applied through an approved debt adviser. Note, you cannot apply if you’ve had a DRO in the last six years. A practical scenario would be a single adult earning minimum wage, with limited savings and no valuable assets, who finds a DRO the ideal solution to write off their overwhelming debts.

Individual Voluntary Arrangement (IVA)

An IVA is a formal agreement with your creditors to pay all or part of your debts. It typically lasts 5 years (6 if homeowner equity release is required). To proceed, 75% by value of your creditors must agree. An IVA is managed by a licensed Insolvency Practitioner and is legally binding, meaning once approved, creditors must adhere to its terms. For example, a small business owner with substantial credit card and loan debts might find an IVA a viable option to manage repayments while keeping their business operational.

Bankruptcy

Bankruptcy might be an option if you cannot pay your debts. It costs £680 and usually lasts for 12 months. Bankruptcy can result in the loss of your home if equity exists, so it’s crucial to consider this option carefully and seek professional advice. A case scenario involves an individual with no significant assets, who, after evaluating all options, decides that bankruptcy is the most viable solution to make a fresh financial start.

Debt Management Plan (DMP)

A DMP is an informal agreement with your creditors to pay off debts at an affordable rate. It’s not legally binding, and creditors aren’t obliged to freeze interest or charges. Typically, DMPs are arranged through free services like StepChange or Citizens Advice Bureau. An example involves a young professional with multiple unsecured debts who opts for a DMP to manage their finances better and gradually reduce their debt burden.

Breathing Space

Breathing Space provides temporary protection from most types of enforcement action and stops creditors from adding interest or charges to your debt. Standard Breathing Space lasts for 60 days, but a longer period is available for those undergoing mental health treatment. However, you cannot apply for Breathing Space yourself; you must go through a registered debt adviser. This solution is particularly beneficial for individuals facing short-term financial difficulties who need time to reorganise their finances without the pressure of enforcement actions.

Common Mistakes to Avoid

When tackling debt, it’s easy to make mistakes that can exacerbate the problem. Here are some common pitfalls to avoid:

• Ignoring Priority Debts: These should always be addressed first due to the severe consequences of non-payment. For instance, ignoring a council tax bill could lead to legal action much faster than ignoring a credit card payment.
• Entering Agreements Without Advice: Always seek professional advice before committing to a debt solution. Debt advisers can offer impartial advice and help you choose the most suitable option for your situation.
• Failing to Budget: Understanding your income and expenses is crucial for effective debt management. Creating a detailed budget can help you identify areas where you can cut costs and allocate more funds towards debt repayment.
• Avoiding Communication: Keeping open lines of communication with creditors can prevent escalation. If you’re struggling to meet payments, proactively contacting creditors can lead to more favourable repayment terms.

Comparing Debt Solutions

Choosing the right debt solution depends on your circumstances. For instance, a Debt Relief Order might be suitable for those with low income and minimal assets, while an IVA could be more appropriate for someone with a regular income but higher debts. Each solution has its pros and cons, so it’s vital to assess your situation carefully. For example, while a DRO can offer complete debt relief for those who qualify, it is not suitable for homeowners or those with significant assets. On the other hand, an IVA allows for structured debt repayment but requires a steady income to maintain regular payments.

Need Help With Your Debt?

Every debt situation is different. The right solution depends on your income, assets, and the types of debt you owe. Our advisers give free, confidential guidance — no obligation, no hard sell.