Some debts carry more severe penalties than others and this means these need prioritising first. This prioritisation process is not determined by the size of the debt, the period or amount of arrears or the threats being made, but by the actual legal remedy the creditor has against you for recovery of the debt. A priority debt is usually defined as one where non-payment can result in you being either imprisoned, losing your home or losig essential goods or services.

Given below is a list of priority debts and the legal consequences of non-payment of that debt:

1. Mortgage/secured loan - Loss of house
2. Rent – Eviction
3. Water – Your water supply cannot be disconnected, but we recommend that this is regarded as essential expenditure, and treated as a priority payment.
4. Council tax - Taken from wages/benefits; bailiffs; imprisonment
5. Gas/electricity - Disconnection/fitting of prepayment meter
6. Magistrates fines - Bailiffs; imprisonment
7. Inland Revenue and VAT - Bailiffs; bankruptcy, imprisonment
8. CSA/maintenance orders - Taken from wages/benefits; imprisonment

After priority debts come secondary debts and the legal consequences of not paying these debts are as follows (just a sample of the major secondary debts): 

1. Credit/store cards - County Court Judgment
2. Personal loan (unsecured) - County Court Judgment
3. Bank loan/overdraft - County Court Judgment
4. Credit sale - County Court Judgment
5. Pawnbroker - Keep pledge
6. Hire purchase* - Loss of goods
7. Catalogue** - County Court Judgment
8. Loan shark*** - Not legally enforceable unless licensed
9. Loan from family/friends*** - Country Court Judgment

* If the threatened goods are essential, e.g. a car needed to get to and from work or a washing machine, such a debt can be treated as priority, however if you have paid less than one third of the total amount owed under the hire purchase agreement the creditor can repossess the goods without a court order being put in place.

**Catalogue debts may be difficult to enforce as it is not always standard practice to complete a formal credit agreement, and creditors should be asked to produce a copy of this if further proceedings are threatened. 

***Individual circumstances may suggest some other debts be treated as priority, although not legally enforceable, e.g. money owed to family, friends or loan sharks.

Before you make any offers of creditor payments you need to prepare a financial statement - see STEP 3.

For free advice call the Consumer Credit Counselling Service on 0800 1381111 or contact Credit Action (www.creditaction.org.uk). This guide is for information only and does not constitute financial advice.