Priority and non-priority debts explained

What are priority debts?

In this section we will ask you to provide information on debts that you may have, that are classed as priority. These are classed as priority because the consequences of not paying them are greater than the consequences of not paying others. For example, if you don’t pay your mortgage you could lose your home. You must always pay these before your other debts.

In this section we will ask you to provide the arrears balance, how much money you owe as a result of missing your payment(s) on a debt. For example, if you have missed 2 payments on your mortgage of £500 each month, the arrears balance on that debt would be £1,000.

We will also ask you for the current arrears payment, which refers to the amount you are currently paying to reduce the amount of money that you owe, which is outstanding on that debt. Let’s use the example above, if your arrears balance is £1,000 and you can’t repay this in one transaction, you may agree with the owner of the debt an amount that is more manageable over a period of time. So, in this case you may agree that you pay £250 over a 4-month period which would be the arrears payment.

Finally, we will ask you to provide the outstanding balance on the debt. This is the total amount you owe on that debt to date.

What are non-priority debts?

In this section of the form we will ask you to provide information on debts that you may have, that are classed as non-priority. These are called in this way because the consequences of not paying them are lower than the consequences of not paying priority debts. You still need to pay these but after you have dealt with your priority debts.

An example of a non-priority debt is a personal loan which is an unsecured form of credit. As a consequence of not paying this, you will not lose any of your assets but it will have an effect on your ability to get credit in the future as it will be recorded on your credit file which other lenders take into consideration because it shows your ability to manage previous credit and your ability to repay that debt.

Please provide the information requested about any debts you owe that has not been included in the priority debts section. Please refer to the examples used above in the priority debts section to explain an arrears balance, a current arrears payment and an outstanding balance.