Dealing with priority debts

You now need to list all your debts, payments you make and balances of each debt on your budget planner. If you have letters or contracts, get all your paperwork together. Some people find opening letters from creditors frightening, but it is important that you do keep and read your letters. If you are struggling ask someone you trust to open your letters with you or contact the Debt Advice Team or an advice organisation.

Some of your debts will be more important than others because of what can happen to you if you don’t pay them. These are called your Priority Debts. You must deal with priority debts first to avoid serious penalties.

List all your priority debts in your budget planner, remember to include the balance owed.

Priority debts and the penalties for not paying them

DebtPenalties
Rent and/or service chargeEviction
Council TaxA visit from enforcement agents (bailiffs), money taken from wages, money taken from benefits, bankruptcy or imprisonment
Gas or electricDisconnection, money taken from benefits
Unpaid magistrates court finesA visit from enforcement agents (bailiffs), money taken from wages, money taken from benefits, imprisonment
Child maintenanceA visit from enforcement agents (bailiffs), money taken from wages, money taken from benefits, imprisonment
Income Tax arrearsImprisonment
TV licenceA fine, imprisonment
County court judgmentA visit from enforcement agents (bailiffs), a charging order, money taken from wages, money or assets frozen
Tax, VAT or National InsuranceA visit from enforcement agents (bailiffs), money taken from wages, bankruptcy, county court judgement (CCJ)
Hire purchase or logbook loanRepossession, county court judgment (CCJ)

Decide an order to tackle your Priority Debts

If you have rent arrears you should always deal with this debt first to avoid losing your home.

After this you must decide what order you deal with other priority debts based on how you think the consequences of not paying will affect you and your family.

Negotiate repayment plans with your Priority Creditors

Contact your most important priority creditor and:

  • explain your financial difficulties
  • tell them you are preparing a financial statement
  • suggest an amount to pay them each month – this will be your regular weekly/monthly payment plus a contribution towards your arrears) – start paying this straight away
  • if your creditor refuses increase your offer and try again

Once your first priority creditor has agreed a repayment plan:

  • start paying the agreed monthly amount straight away
  • update your financial statement and recalculate your disposable income to take account of this payment
  • repeat these steps for each priority creditor until all your priority creditors have been dealt with

If your creditors won’t agree a repayment plan with you, or you don’t have enough disposable income to deal with all your Priority Debts, get advice from one of the organisations at the back of this handbook.

Information about enforcement action

Eviction for council tenants

If you do not pay your rent or do not keep to an agreement to pay off your arrears, your landlord can apply to the county court for a possession order to evict you.

Always seek advice and attend any court hearing.

A possession order doesn’t necessarily mean automatic eviction. The court will consider your circumstances and might give a suspended possession order. This is where possession is granted but suspended on the basis you make regular payments towards your rent arrears.

If you don’t keep to the court ordered payment, your landlord can go back to the court and you could be evicted.

If you are finding it difficult to keep to your court ordered payments get advice from an organisation at the back of this handbook.

Eviction for other tenants

If you do not pay your rent your landlord may evict you. The process of eviction depends on the type of tenancy you hold. If you are unsure of what type of tenancy you hold, you must seek help straight away.

If you think you are at risk of being made homeless contact our Homeless Prevention Service immediately on 0118 937 2165, email housing.advice@reading.gov.uk or the housing web pages.

The sooner you get help the more likely it is that you avoid losing your home.
Always attend any court hearings.

Council Tax liability orders

If you don’t pay your Council Tax the Council will apply for a liability order at the Magistrates Court.

The court must issue the liability order unless:

  • the council didn’t follow proper procedures
  • you have paid the amount demanded before the court date
  • bankruptcy or winding up proceedings have started

If you think one of these applies to you, contact the Council immediately.

The Liability Order will order you to pay the amount outstanding plus Court costs. The Council offer an arrangement for you to pay, or you can suggest your own.

If you don’t make an arrangement or you don’t stick to your agreement the Council can:

  • Issue an Attachment of Earnings Order (AOE) which requires your employer to deduct a percentage of your earnings depending on what you earn. Your employer can charge an administration fee of £1 per deduction. You can only have two AOEs at a time, so you will need to make other arrangements to pay back any other Council Tax debt.
  • Issue an Attachment of Benefit (AOB) which requires the Department for Works and Pensions to deduct an amount from your benefits. You can only have one AOB at a time, so you will need to make other arrangements to pay back any other Council Tax debt.
  • Appoint Enforcement Agents (Bailiffs) to visit your home to collect the money you owe or take goods to sell to pay off the arrears. Additional costs will be added to your debt if this happens.
  • Apply to the courts to have you committed to prison if the Enforcement Agents (Bailiffs) have been unable to collect the debt.

County Court Judgement

A County Court Judgement (CCJ) is a court order a creditor can apply for to order you to repay a debt owed to them. Having a CCJ is not a criminal offence and you cannot be sent to prison.

A CCJ is normally recorded on the public ‘Register of Judgments, Orders and Fines’, and on your credit file. The information will stay on your credit reference file and the Register of Judgments, Orders and Fines for six years from the date the CCJ was made (unless it is paid in full within one month).

Having a CCJ can reduce your credit score and make it more difficult and expensive to get credit.

Most non-priority debts are regulated by the Consumer Credit Act. Where this applies the creditor must send you a valid ‘default notice’ and ‘letter of claim’ before applying for a CCJ. If you agree a repayment plan with the creditor and make payments, you can avoid court action. If the creditor wants to take court action at a later date, they will need to send a new ‘letter of claim’.

If a creditor takes court action against you, a ‘claim pack’ will be sent. You must:

  • complete the reply form attached to the summons
  • include your offer of repayment
  • attach a copy of your financial statement
  • return the form to the Court before the deadline

Get help straight away from one of the organisations that offer free advice if you do not understand letters from the court.

There are two types of order that the County Court can make:

  • Instalment Order, where you repay the debt over time as stated in the court order.
  • Forthwith Order, where you are ordered to pay the debt in full straight away.

If you’ve admitted the claim previously and made an offer of payment, it’s likely that you will receive an Instalment Order. The amount you repay each month should be set using information you will have given about your income when you completed your admission form. If the court does not know your income or financial situation, you will probably receive a Forthwith Order to pay in full straight away.

If you cannot afford to pay the full debt or the instalments, you can ask for the decision to be looked at again. This is called a redetermination. Get help to do this from one of the advice organisations.

If you receive a CCJ and do not pay as ordered, the creditor can ask the court to enforce the court order by:

  • appointing enforcement agents (bailiffs) giving them a ‘Warrant of Execution’ to visit your home to try to seize goods to sell to pay off the money you owe
  • issuing an Attachment of Earnings Order (AOE) which requires your employer to deduct a percentage of your earnings depending on what you earn. Your employer can charge an administration fee of £1 per deduction
  • (if you own a property) instructing that a Charging Order to be secured against your home meaning you could lose your home if you do not pay back the debt
  • freezing money in your bank account, this is called a Third Party Money Order

If you already have a CCJ, include this debt with other non-priority debts on your financial statement and work out the offer of repayment in the same way for each. More information on debt options.

If you need to change the amount you are paying to a CCJ, try negotiating directly with your creditor. If they agree you do not need to go back to court. If this doesn’t work you will need to apply to the court for a redetermination by completing court form N245 to try and change the court order.