Step 3 Dealing with your priority debts

​What are priority debts?

Some debts are more important than others. The law gives different creditors different ways of getting their money back.

If you don’t act quickly, some creditors could:

  • take away your business premises or your home (repossession or eviction);
  • cut off your gas or electricity (disconnection);
  • cut off the water supply to your business premises (disconnection);
  • send bailiffs to take belongings from your business premises or your home; or
  • ask the magistrates’ court to send you to prison.

It is important to use the money you have for your creditors to make agreements to settle these debts first. If you are not sure about how much to offer, contact us for advice.

How much do I have left to pay my creditors?

Important:

don't panic

You should be given warning and, as long as you act quickly, you should be able to stop these things happening.

Creditors can take action on some priority debts without going to court first. For example, gas and electricity companies can disconnect you if you have a meter outside your business premises or your home. Her Majesty’s Revenue & Customs (HMRC) can use bailiffs to collect income tax and VAT arrears without a court order. Most other priority creditors can only usually take action against you after court action.

Business and household priority debts

You may have more than one priority debt. Some of these may be business debts, for example, rent arrears for your business premises. Some may be household debts, for example, council tax arrears. It is important to deal with all your priority debts. The first part of this step tells you how to deal with any priority business debts you have. The second part of this step tells you how to deal with any priority household debts you have. 

The chart below tells you what might happen if you delay sorting out different priority business debts.

​Priority business debt Possible action against you​
​Business mortgage ​Repossess your business premises.
Second business mortgage or secured business overdrafts and loans ​Repossess your business premises (or repossess your home if the debt is secured on your home).
​Business rent or lease arrears ​Evict you from your business premises. You may also still have to pay the arrears, which could result in court action called diligence.
​Business rates ​Use sheriff officers to try to take goods from outside or inside your business or home, bankruptcy.
​Gas or electricity and water supplies to business premises ​Cut off your supply.
​Income tax, National Insurance and VAT arrears ​Freeze your bank accounts, try to take goods from outside or inside your home or business, make deductions from your wages (if you are employed), or bankruptcy.
​Hire purchase, conditional sale or equipment leases (for your business) ​Repossess the goods or apply for a court order to make you hand them back.
​Major suppliers ​Loss of supplies which could make your business fail.
​Some business overdrafts and loans ​You may need to maintain your bank account in order to carry on trading. This will depend on the needs of your business.
Accountants ​They could take a 'lien' (where they keep your books). This means, for example, you cannot access your figures for tax returns.