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Day 2: Which debts should you deal with first?

You have made a great start by sorting through your bills. The next step is working out what to pay first. This will help your debts feel easier to manage.

It can be hard to know which bills are the most important. But things are a lot easier once you do.

Yesterday we found out what you owe. Today we are looking at your household bills.

These are known as 'priority debts'. Keep up to date with them if you can. And make sure your living costs are covered while you deal with debts.

Today's tasks...

  1. Find out what your priority debts are and why they matter
  2. Understand why your unsecured debts are considered 'non priority'
  3. Learn how to deal with the people you owe contacting you

Task 1: Make a list of your priority debts

These could be:

  • Mortgage or rent
  • Service charge or ground rent
  • Council tax
  • Electric
  • Gas
  • Water
  • Hire purchase goods
  • County Court judgments (CCJs)
  • Magistrate or court fines
  • Child maintenance

Which of these are you dealing with?

  1. List them
  2. Make a note of which you are behind on paying

Why is a bill a priority?

The consequences of not paying can be bigger than for other bills.

Such as:

Laws are different across the UK. Read more about priority debts.

Help. I am behind with a priority debt. What can I do?

Do not panic. There are options.

You might be able to make lower payments for a short-period if money is tight.

You could also:

  • Ask to pay less for a while longer, based on what you can afford. Share your budget with the people you owe. Show them you are getting help with your debts.
  • Ask for a payment holiday if you cannot afford anything at all.

If this is happening to you, please don't wait to come to us for help.

Companies do not have to agree but many will be reasonable if you show what you can pay.

However, they may:

  • Ask you to reduce payment on other debts
  • Still take legal action against you

Useful links:

Other things you can do:

  • Check you are in the right council tax band. Speak to your local council as soon as you can
  • Give back anything you have on hire purchase. You still owe money, but it stops being a priority debt
  • Talk to your mortgage provider. See if they can give you a lower payment

Task 2: List your non-priority debts

Now let's look at how to deal with lower priority debts.

These are your unsecured, personal debts. An 'unsecured debt' is one you didn't 'secure' against an asset like your house or car.

They could be:

  • Personal loans
  • Credit cards
  • Overdrafts
  • Store cards
  • Catalogue debts
  • Payday loans
  • Cancelled contracts. For example, old mobile phone debts

It is not quite as bad if you miss a payment to one of these.

To deal with them:

  1. Work out what is left in your budget after paying your priority debts
  2. Take out what you need for every day living
  3. Use what is left over to pay lower priority debts

Task 3: Deal with creditors getting in touch with you

When you miss payments, the people you owe start to get in touch more.

This is normal. It is just part of the debt collection process.

You may think the person who contacts you most is the most important. Do not be fooled. They are not.

Being contacted by letter or email

Ways creditors can write to you with demands to pay what you owe.

  • Annual statement: They send these to all their customers at least once a year
  • Reminder letters: They may ask you to make a payment or set up a payment plan
  • Default notices: This lets you know you broke the credit agreement by not paying. A note gets added to your credit file
  • Letters from debt collectors: They buy debts and chase payments. They may use words that sound scary. But, remember, they do not have any legal rights to collect the debt
  • N1 County Court judgment (CCJ) claim forms: You get one of these if a creditor raises a CCJ against you.

A CCJ is a court order to make you pay what you owe.

    • They are light blue in colour and have a court crest in the top left corner
    • There is a deadline to respond. Do not ignore this deadline
    • If you cannot pay, you may be able to get the court to agree to a payment plan
    •  Find out more about CCJs

Always open and read letters from creditors as soon as you get them

You might not have to respond. But there could be important information on what happens next.

You cannot stop creditors writing to you. But, you can make a complaint if they do not treat you fairly.

Find out more about your rights.

Being contacted by phone and text

There are rules about this and things you can do:

  • They cannot call you at ‘unreasonable’ times: That means calling you too late or too early
  • There is no limit to the number of times they can call you: But complain if they call you too much, or at times you have said you cannot take a call

You can keep it brief and ask them to write to you: Say you would prefer a letter or email. Or have a short chat to say you are paying what you can afford. Tell them we are helping you. You can hang up if they upset you: You have the right to end call if they do not treat you well

You will not get into trouble for this

You can get them to remove your number: We have template letter to stop a creditor from calling (PDF) you can use

Remember to:

  • Focus on paying priority debts
  • Pay non-priority debts with what is left over

That is all for today. Now go and have a cup of tea. You have earned it.

Debt happens. We deal with it.

We have helped millions of people since 1993.

Find out how.

"StepChange recommendation"

"The process of establishing a DMP is very straightforward. They make you budget properly. And then arrange a very manageable amount each month to pay your creditors off. I recommend using StepChange to help make your monthly outgoings easy to manage with more peace of mind."

Jason, Feefo Review

 Coming up in day 3...

We will help you go through your bills and statements. And then you can start putting together a budget.

Skip ahead to day 3 now