Council tax arrears can be a worrying time.
Classed as a ‘priority debt,’ council tax is pursued differently from credit cards and loans.
This is because councils have legal powers to pursue unpaid council tax more aggressively, including issuing liability orders, using bailiffs, or even deducting payments directly from your income. This can make for extremely stressful circumstances.
The good news is council tax arrears can be managed, and aggressive measures can be prevented through numerous solutions.
In this article, we’ll discuss the various options available to you to potentially write off council tax debt.
What are Council Tax Arrears?
Council tax arrears occur when you miss scheduled council tax payments and fall behind on what should have been paid. This can happen for many reasons, such as a loss of income or unexpected bills, such as car repairs.
If you’re struggling to pay your council tax get in touch with your local authority as soon as possible to discuss payment options. Ignoring the problem can lead to bailiffs and additional court costs.
Council tax arrears are a priority debt, local authorities have many powers to recover the debt. This can include sending reminders, final notices and even court action. If you’re struggling to pay your council tax get advice from a debt advisor or a local authority representative to discuss options and avoid further problems.
Can Council Tax Debt be Written Off?
The short answer is yes, council tax debt can be written off. Depending on the circumstances and solution, this can be a percentage or the whole amount.
Solutions that can include writing off portions of your council tax debt include Section 13a, Individual Voluntary Arrangements, Debt Relief Orders and Bankruptcy.
Under Section 13a (1)(c) of the Local Government Finance Act 1992, councils have the discretion to write off council tax for those who they deem in severe financial hardship. Typically, this discretionary relief is around people who are suffering from severe mental or physical health conditions.
The Section 13a legislation is a rare occurrence and not easy to attain debt write-off with, but if successful, you could have your council tax debt written off. This can be in full or partially.
To apply for your council tax debt to be written off under section 13a, you will need to contact your local authority and provide substantial evidence of your financial circumstances and any relevant medical or supporting documentation.
Your local council will then consider the merit of your application and decide whether discretionary relief should be applied to your circumstances.
Individual Voluntary Arrangements (IVAs)
An Individual Voluntary Arrangement (IVA) can be a lifeline for those with council tax arrears and bailiffs threatening action.
This is a formal agreement between you and your creditors. It gives you legal protection and allows you to pay off your debts, including council tax, over a set period, with any outstanding debt written off.
An insolvency practitioner assesses your financial situation to determine a realistic repayment amount, and creates an IVA proposal which must be approved by creditors holding 75% of your debt.
Creditors, including bailiffs, cannot take any further action and are actually prohibited from contacting you. Your chosen IVA provider handles all contact with people to whom you owe money.
The structure of an IVA can provide much-needed relief from creditor harassment and bailiffs.
It allows applicants to effectively manage their finances and potentially write off a large percentage of debt without enduring aggressive creditor contact, helping you get back on track.
Bankruptcy and Debt Relief Orders
For those in severe financial difficulty, bankruptcy or a Debt Relief Order (DRO) may be a more suitable option.
A Debt Relief Order (DRO) is designed for individuals with unsecured debts under £30,000, total assets such as a car and property worth £2,000 or less, and less than £75 disposable income per month after household expenses.
Council tax debt can be included in both bankruptcy and DROs and can be written off or discharged after a certain period. This means those in severe financial hardship or health issues may have their council tax debt written off under certain circumstances.
During a DRO, you must comply with certain restrictions, such as not borrowing more than £500 without telling the lender about the DRO. Additionally, if your financial situation improves during your debt relief order, such as a pay rise or a new job, you may not be eligible for debt write-off at this point.
In bankruptcy, the official receiver takes control of your finances and assets, which could include your savings, although most pension schemes are protected. Although this may seem extreme, writing off the debt can give you a fresh start.
Understanding your options
Understanding your financial circumstances and which solution is the most appropriate for your circumstances is extremely important.
Any solution that allows you to write off council tax debt, whether as a percentage of the total amount or as a whole, can have implications for your short and medium-term financial well-being.
Here at PennyPlan, we offer valuable debt advice that explores all the solutions available to you in becoming debt-free and the advantages and disadvantages of each.
If you want more information on what solution best suits your circumstances, speak to our friendly, non-judgmental team today.
What is a Council Tax Liability Order?
A council tax debt liability order is a court order that allows the council to instruct proceedings in collecting unpaid council tax.
The Magistrates ‘ Court grants a council tax liability order, giving the council extra powers to recover council tax arrears.
If a liability order is granted, the council can take more powerful actions, such as deducting payments from income or appointing council tax bailiffs to seize assets to recover the money owed.
These deductions are called ‘attachment of earnings orders’ and can hit your disposable income hard.
Additionally, liability orders add court costs to your outstanding council tax debt, and the charges can mount up quickly, making it more difficult to pay the debt.
The costs of liability orders can vary from £80 to £130, covering the council’s administrative and legal costs.
To prevent this, it is critical to address the problem promptly before further action can be taken.
The solutions mentioned in this article could be helpful, but some may not be accessible if action is delayed. Therefore, it is important to take swift action.
The Court Process
The court process for council tax liability orders can be complex.
The Magistrates’ Court will issue a liability order if it is satisfied that the council has served the statutory notices and the debt remains unpaid.
Before the court issues a liability order, it must be satisfied that the costs claimed by the council are reasonable and were incurred.
To avoid a liability order you need to pay the full amount due including costs by 4pm on the last working day before the court hearing.
Failing to do so can lead to serious consequences including up to 3 months in prison if the court decides there was a deliberate refusal to pay and bailiffs have not recovered the debt.
Bailiff Action and Debt Collection
Your local council may instruct bailiffs to collect the debt if you don’t pay your council tax.
Bailiffs working on behalf of the council have the power to seize goods to sell and clear the debt. This can be a stressful and intrusive process, so you should act to avoid it.
To prevent bailiff action pay regularly no matter how small and talk to your council to discuss payment options. Entering into an Individual Voluntary Arrangement (IVA) will also stop bailiff action and allow you to set up a council tax arrears payment plan.
Don’t ignore the problem or fail to talk to your council, and you could face further consequences, including extra court costs. Talking to a debt advisor or council representative will help you find solutions and avoid the serious consequences of bailiff action.
How to Prevent Council Tax Arrears
Preventing council tax arrears is key to avoiding the stress and legal hassle of unpaid debt.
Doing a monthly budget could help you find ways to save and pay your council tax. Paying your council tax on time is key to avoiding arrears and legal action.
Budgeting
Doing a monthly budget could help you find ways to save and pay your council tax. Paying your council tax on time is key to avoiding arrears and legal action.
By spreading your council tax over 12 months instead of the standard 10-month plan, you can create a more regular and manageable budget. Although it may not seem a lot, a council tax bill of £2500 can have its monthly payments reduced by £42.
Knowing your council tax band is important for creating an accurate budget, as bands determine the rateable value of the property, which affects the amount you pay.
Budgeting properly means you can pay your bills and find savings. This proactive approach will help you stay on top of your council tax payments and avoid arrears.
Speak To Your Local Authority
If you are struggling, always speak to your local council first. They could have a solution to help manage your council tax payment.
If the council are unwilling to provide solutions that are suitable, seek professional help, such as financial wellness solutions like PennyPlan.
We address the root causes of council tax arrears and help you take control of your finances to avoid debt and its associated problems.
Council Tax Reduction Scheme
The Council Tax Reduction Scheme is a government funded scheme to reduce council tax liability for eligible individuals. To be eligible, you must meet certain criteria, such as being on a low income or living with someone who has a disability.
If you have had a serious reduction in income, such as a job loss leaving you on minimal benefits, or have experienced a recent disability, then a council tax reduction could potentially reduce the burden.
The reduction can be applied to owned and rented properties if the address is your main residence.
You can apply for the scheme through your local council, which will assess your eligibility based on your income and personal circumstances.
This scheme can give you significant financial relief and make your council tax payments more manageable.
Conclusion
In summary, there are ways to manage and get council tax debt written off.
IVAs, bankruptcy, and DROs are structured solutions for getting back on track by having some or all of your council tax written off.
These solutions can prevent the issues around council tax liability orders prevent further hassle, such as court-appointed debt collectors and having to pay additional court costs.
Preventing council tax arrears by budgeting properly and talking to your council can be key in avoiding further issues.
If you are feeling overwhelmed by debt problems and increasing council tax bills, professional assistance such as PennyPlan can provide help with both immediate debt and underlying financial issues.
By taking control and getting professional help you can achieve a less stressful future and debt freedom.
Remember, managing council tax debt is about fixing the current problems and preventing future ones.
Stay informed, stay proactive and get your financial peace back.
FAQs
What is an IVA and how does it help with council tax debt?
An Individual Voluntary Arrangement (IVA) helps with council tax debt by creating a payment plan to repay arrears over time, potentially writing off a large chunk of the debt.
It is a legally binding agreement between you and your creditor to get you back on track.
What are the DRO eligibility criteria?
To be eligible for a Debt Relief Order (DRO), your unsecured debts must be under £30,000, your assets must be under £2,000, and your disposable income must be less than £75 per month after essentials.
What can the council do if a liability order is made?
If a liability order is made the council can deduct payments from wages or benefits, engage enforcement agents or start bankruptcy proceedings for large debts.
How can a budget help prevent council tax arrears?
A budget is key to managing your finances as it will help you find savings and make sure you pay council tax on time.
By spreading payments over 12 months you can make your financial commitments more manageable and avoid arrears.
Why is talking to your council important for council tax debt?
Talking to your council is key to managing council tax debt as it will help you fix issues early and negotiate repayment plans and prevent further hassle and legal action.
