Confusion over debt priorities puts consumers at risk of homelessness

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People are placing themselves at greater risk of losing their home, visits from bailiffs and even prison by paying off consumer credit debts before other priority debts, warns Citizens Advice.

New evidence from the national charity reveals 28 per cent of people would prioritise consumer credit debts – such as credit card bills, personal loans or overdraft repayments – ahead of household bills, like rent, mortgage or utility bills.

The charity says the priority should always be to pay off household bills first, otherwise they risk further financial and emotional hardship.

Half of adults in the UK have both household and consumer credit debts or bills, equivalent to 24 million people.

Of those with both debts, Citizens Advice found that 3.6 million people (15 per cent) would stop paying their rent or mortgage before their credit card repayments.

Meanwhile, 6.5 million people (27 per cent) would stop paying their council tax before their credit card repayments 1.2 million people (5 per cent) would stop paying their gas bill before a store card.

By not prioritising household bills, Citizens Advice warns people are placing themselves at greater risk of eviction, visits from bailiffs, being cut off from energy supplies and even prison.

It comes as the charity reveals a major increase in the number of household debt problems it helps people with. Latest figures show more people are seeking help with rent, council tax, fuel and water debts while consumer credit problems are in decline.

In the last year, 43 per cent of the debt issues Citizens Advice helped with related to essential household bills (567,000 issues) compared to 34 per cent five years ago (452,000 issues).

According to Citizens Advice, people sometimes do not prioritise household bills because they may not realise the consequences if they stop these payments.

In other cases many consumer credit debt creditors – like credit card companies or other lenders – often ‘shout the loudest’, making people believe they should be repaid first.

Citizens Advice is urging anyone who is struggling to stay on top of their bills and credit commitments to seek help sooner rather than later in order to stop debts escalating and avoid the serious consequences caused by non-payment.

Chief executive Gillian Guy said: “Falling behind on household bills can have serious consequences.

“From getting the power cut off to bailiffs knocking at your door, to losing your home or even prison – failing to pay household bills can put people in vulnerable situations.

“Huge numbers of people are unsure of what debts they should prioritise when they get into difficulties which underlines how important it is for people to be able to access free, independent help to manage their finances.

“Similarly being offered money advice at key moments in life could also help people make the most of their money, avoid debt and plan for the future.”