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Dealing with urgent debts

Dealing with urgent debts

If you're in debt, it's important to keep in contact with the people you owe money to (your creditors). If you're very worried about your debts, you may be afraid to contact them, but you can get help to do this. If your creditors don't know you're having financial difficulties, they'll assume you don't want to pay and start taking action against you.

Before you start contacting your creditors, you'll need to sort out how much money you owe and who you owe it to.

Then you'll need to sort out which are the most urgent debts to pay off and if you've got enough money to do this.

You need to deal with some debts more urgently than others because the consequences of not paying them can be more serious than for other debts. These are known as priority debts and include things like mortgage, rent and council tax debts. The people you owe this type of debt to are called priority creditors.

To see whether you've got enough money to pay off your priority debts, you will need to work out how much money you've got coming into your household and how much you need to spend. This is called your budget.

If you've got some money to pay off your debts, you must make sure you deal with any priority debts first. After that you can deal with any less urgent debts such as credit card debts, overdrafts and other loans. These types of debts are known as non-priority debts.

When you have worked out how much you can afford to pay your creditors, you will need to contact each priority creditor and try to make an arrangement to pay back what you owe. After that, if there's money over, you can make offers to non priority creditors.

This page tells you how to deal with your priority creditors.

For information about sorting out how much money you owe and working out your budget, see How to sort out your debts and How to work out your budget.

If you haven't got enough money to repay your priority debts, you need to get advice as quickly as possible as the outcome could be serious.

Your local Citizens Advice Bureau can give you advice about debt problems. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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What are priority debts

Some debts are more urgent than others because the consequences of not paying them can be more serious than for other debts. These are known as priority debts. Priority debts include:

  • mortgage or rent 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 unpaid arrears, you can be sent to prison
  • court fines such as 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 unpaid arrears, you can be sent to prison. Parking penalties issued by local authorities are not priority debts
  • arrears of maintenance payable to an ex-partner or children. This includes Child Support you owe to the Child Support Agency (CSA) or Child Maintenance Service (CMS). If you don't pay these, a court can use bailiffs to take your goods. If, after this, you still have unpaid arrears, 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.

You may have other debts which you think it is particularly important to pay. For example, if you're disabled and rely on your car to get around, you may need to make repayments on a hire purchase agreement for your car a priority, to prevent it being repossessed.

You need to think very carefully about which debts you treat as the most important ones. You must have very good reasons, as you might have to convince a court or your other creditors why it is reasonable for you to treat these debts as more important than others.

If creditors feel you are treating another creditor more favourably, without a good reason, they may not accept your offer and may decide to take further action against you.

For more information about debts which are considered less urgent than priority debts, see How to sort out your debts and How to deal with your creditors.

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How to deal with priority creditors

Don't ignore letters or phone calls from your priority creditors. Get in touch with them as early as possible and explain to them why you are in debt.

It's best to contact priority creditors by phone if you can to sort things out more quickly. Make a note of all telephone calls and meetings, including the name of the person you spoke to and what you agreed. If you phone, you should follow up the call with a letter, confirming what you said on the phone. Keep copies of any letters you write to them.

When you contact your creditors, explain why you're in debt. If you can't make an offer of repayment straight away, ask for more time, for example 14 or 28 days, while you get advice and work out your budget. Priority creditors may not agree to wait, so you may need to offer something on top of your usual instalment until you get advice. Explain that you're trying to deal with your debts and you will contact them again shortly when you're in a position to know how much you can afford to pay. If the first person you speak to is unhelpful, ask to speak to someone more senior.

It's important to try to pay at least the regular instalment in the meantime. If you can't do this, pay as much as you can afford and get help as soon as possible.

An advice agency such as your local Citizens Advice Bureau can help you get in touch with your creditors. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

If your priority creditors are threatening to take court action or have started to take court action against you contact them straight away. If they haven't started court action yet, ask them not to take any further action for two weeks so that you can work out an offer and contact them again. If they have already begun court action, they may still be able to reach an agreement with you and in some cases may be willing to stop the action. This will depend on the type of debt and how much you owe.

Even if a priority creditor continues to take you to court, you will usually be able to make an offer of repayment. The court papers you receive will tell you what you should do and by what date.

If you can't afford to pay anything

Once you've sorted out your finances, if you can’t afford to pay anything to your priority creditors and your situation isn’t likely to get better, the outcome may be very serious. You should get advice straight away. An adviser will be able to help you work out what is the best thing to do in your situation. Tell the creditor that you are getting advice and will contact them as soon as you can. Ask them to stop further action for a few weeks while you get advice.

Your local Citizens Advice Bureau will be able to advise you. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

If you can afford to make payments

If you do have some money to pay back your priority creditors, contact each one and try to make an arrangement to pay back what you owe. You can either do this yourself, or get the help of an experienced debt adviser.

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What you should say to your priority creditors

Most creditors will consider a reasonable request or offer of repayment that you make. What you ask your creditors for will depend on your financial circumstances, including:

  • how much money you've got spare to pay your priority creditors
  • how many priority debts you have
  • whether or not your situation is likely to get better.

It’s important that creditors can see that what you are asking for is reasonable in the circumstances. So make sure you give them a copy of your budget sheet and explain your situation fully.

If your problem is short term

You might not be able to pay off anything towards your debts at the moment because you've lost your job, or are off work sick. But you expect things to get easier shortly because:

  • you're going back to work
  • you're going to get benefits
  • you're getting a pay out from a Mortgage Payment Protection Insurance policy or a loan
  • you're going to sell some of your belongings to help pay your debts.

In England and Wales, for more information about payment protection insurance, see Borrowing fact sheets.

Make sure your creditors know about your circumstances, as they might be prepared to give you extra time to pay up.

If you're offering to pay back extra at regular intervals

You might want to ask your creditors if you can pay back an extra amount at regular intervals until the debt is cleared.

You need to be clear about what you are asking for. Tell your creditors whether the repayments will be on a weekly or monthly basis.

You also need to be sure that you can afford the amount you are offering to pay. To work out how much you can afford, you will need to look at your budget.

Don't forget to mention any changes that you know are going to happen which will affect your ability to pay or the amount you are offering.

Your local Citizens Advice Bureau can help you negotiate with your creditors. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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How to deal with mortgage arrears

It's important to deal with mortgage arrears straight away. If you don't you may lose your home. There are a number of ways that you can deal with mortgage arrears. Depending on the type of mortgage you have it may be possible to:

  • pay interest only
  • add the arrears on to the total amount you owe (capitalise)
  • pay by instalments
  • change to a repayment mortgage.

If you get certain benefits, you may be able to pay off the arrears direct from your benefit.

For more information about how to deal with mortgage arrears, see How to sort out your mortgage problems.

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How to deal with rent arrears

If you get behind with your rent payments and don't sort it out, you could lose your home.

If you rent from a Registered Social Landlord (RSL)

If you rent from a registered social landlord such as a housing asssociation or local authority, the landlord should accept a reasonable offer of repayment. Make sure you keep paying your regular rent amount. Contact the landlord with a copy of your budget and ask them to accept an extra payment each month (or week) on top of your rent to repay the arrears. Start paying the amount you offer as soon as you can.

If you get a means tested benefit you may be able to pay the arrears back by direct deductions from your benefit. Check with the Department for Work and Pensions (DWP) if this applies to you.

If you rent from a private landlord

If you rent from a private landlord such as an individual or through a lettings agency, you may have to agree to clear the arrears more quickly and the landlord may be able to take action to evict you at an earlier stage. In this case, you may have to cut back your spending for a while so that you can repay the arrears. If you owe rent arrears to a private landlord, you should get advice straight away.

Your local Citizens Advice Bureau can advise you about your rent arrears. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

In England and Wales, for more information about how to deal with rent arrears, see the Rent arrears fact sheet [Adobe Acrobat Document 120 KB].

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How to deal with gas and electricity arrears

Gas and electricity providers have to take into account your ability to pay and should consider a reasonable offer to repay arrears by instalments.

If you are struggling to repay arrears, you can ask for a pre-payment meter.

If you get a means tested benefit you may be able to pay the arrears back by direct deductions from your benefit.

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How to deal with council tax arrears

Local authorities have some freedom of choice about how to collect council tax arrears. They may agree to spread the arrears over the rest of the council tax year or add it to the next year's bill.

If the debt is already with bailiffs, you can ask the local authority if they will agree to withdraw court action and let you pay them directly. They don't have to do this but if they agree, you will have to pay any bailiff's costs which have already been added to your bill.

If the local authority won't agree to withdraw the account from bailiffs, you should try to agree a repayment plan with the bailiffs.

If you are having problems getting your plan agreed, get advice, for example from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

If you get certain benefits, you may be able to pay the arrears back by direct deductions from your benefit. Check with the Department for Work and Pensions.

If you work, you can pay the arrears back by deductions from your wages called an attachment of earnings order. The amount you pay is set and it may be more than you can afford. An adviser can work out how much you will have to pay back in this way.

In some circumstances, the local authority or the court can agree to write off (remit) a debt if you can show that you can't pay anything. You will still need to pay your ongoing bill.

In England and Wales, for more information about council tax arrears, see the Council tax arrears fact sheet [Adobe Acrobat Document 40 KB].

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How to deal with child support and maintenance arrears

Child support arrears

If you are behind with payments of child support you should pay under the 1993 or 2003 Scheme, you should contact the Child Support Agency (CSA) straight away to make an arrangement to pay. If you’re in arrears under the 2012 Scheme, contact the Child Maintenance Service (CMS). If you don't, they will apply for a deduction from earnings order which allows them to take money direct from your wages. The amount they can take is set.

The CSA or CMS should try to contact you to make an agreement to pay the arrears as soon as a payment is missed. If you don't come to an arrangement with the CSA or CMS to repay what you owe, they can take further action through the courts.

If this happens, get advice straight away.

In England and Wales, for more information about child support arrears, see the Child maintenance arrears fact sheet [Adobe Acrobat Document 42 KB].

Maintenance arrears

If you fall behind with payments of a court order for maintenance, you can go back to the court and ask them to change (vary) the order to an amount you can afford. If you don't do this, you will be ordered to appear in court to explain why you haven't paid. You can still come to an arrangement to pay.

In England and Wales, for more information about maintenance arrears, see the Child maintenance arrears fact sheet [Adobe Acrobat Document 42 KB].

If you need help sorting out maintenance arrears, you can get free advice, for example from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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How to deal with income tax arrears

If you have arrears of income tax, you should contact HM Revenue and Customs (HMRC) as soon as possible. Ask them to hold off action while you get advice or work out what you can afford to pay.

You may need to get specialist help to make sure the tax you're being asked to pay is correct. You can get help from an accountant or Business Debtline or TaxAid.

If you run a small business and it is still trading, you will need to treat the debt as a priority. Otherwise, HMRC can seize your essential goods without a court order which may mean your business has to close.

HMRC may agree to write off a debt in exceptional circumstances, for example if you can't afford to pay the debt and you can show that your circumstances won't improve because of illness or old age. If this applies to you, get help from a specialist adviser.

In England and Wales, for more information about income tax arrears, see the Income tax arrears fact sheet [Adobe Acrobat Document 140 KB].

If you need help sorting out income tax arrears, get advice, for example from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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How to deal with court action

A creditor may threaten to take you to court. However, they usually have to send you a written notice first, warning you that they will start court action if you don't settle your debt.

If court action has started, read the papers you get carefully and make sure you reply to letters from the court within the time limit. Get advice if you don't know how to fill in the forms. If you've already worked out a budget, you can use this to help you fill out the form and to work out how much you can afford to pay.

If there's a court hearing, make sure you go to it. If you have time before the court date, try to speak to an adviser. They can help you work out what to say in court and some advisers can go to court with you, if you need it. If you go to the court on your own, check with the court staff whether there is a duty solicitor or advice service available in the court.

If your offer is refused or you don't accept that you owe the money, you should get advice from an experienced debt adviser.

If you have to go to court for a priority debt, get advice, for example from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

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Further help and information

You can get more information about how to deal with debt and money on the following Adviceguide pages:

Business Debtline

www.bdl.org.uk.

TaxAid

www.taxaid.org.uk.

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Citizens Advice

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