When you are dealing with debt, it’s easy to see those you owe as one big mass. A knot, in fact – one that you’ve spent years tightening, and now you face the reality of having to unravel it.
There’s no doubt it’s not going to be a pleasant process, but it is one that has to happen. Rather than seeing everything as just the huge, amorphous “the debt”, it needs to be separated out into all the strings that made up the knot.
The reason for this is simple: not all debts are equal. As with most things in life, there is a priority list when it comes to who you should repay first.
Only by discovering who is owed, how much they are owed, and how urgent it is, can you truly begin to cut a swathe through the problem. To do that, you have to begin with the most pressing debts: the priority debts.
Priority debts are the ones you have to pay, or at the very least arrange a repayment plan for. While these may be some of the most difficult to resolve, sometimes, you have to throw yourself into the deep end and just handle them.
The fine for not paying your council tax is not only expensive in monetary terms, but it can also result in a prison sentence if you leave it for too long. Ask for an appointment with an advisor at your council to try and solve it as soon as possible.
Again, this is a priority debt because of the penalties that can result from it. Not only could you be risking a prison sentence and a fine, but income tax debts can also result in the loss of any assets you own.
If you’re not sure about the next step, chartered tax advisers like Howlader & Co can point you in the right direction.
Mortgage and/or Rent
With the threat of prison lifted by tackling the first two priority debts, now you can move to securing the roof over your head. If you’re a homeowner, your mortgage provider might be more understanding than you think about your financial circumstances.
The worst thing you can do is ignore the problem, so talk to them, be honest, and go into such discussions with a realistic repayment plan in mind.
If you rent and have arrears in your payments, then life may be more difficult. It’s always worth talking with your landlord to see if you can come to an agreement, but they are under no obligation to accept. It’s important you know your rights regarding eviction and the legal process surrounding it.
What If You Disagree These Are Priority Debts?
Finally, a note on why these are priority debts: it’s because of the consequences. For unsecured debts – such as credit cards, who may hound you more for repayment than the above – you might risk your credit score, but prison and/or the loss of your home is not a risk.
Always put the above debts first, and you’re on your way to untangling that knot once and for all.