Do you have outstanding debt, including paying your council tax arrears? Did you know that council tax is treated as a priority debt meaning the consequences of not paying it is more severe than for other debt obligations?
It means local authorities have increased legal powers to collect arrears, including using Council Tax Bailiffs. There is a solution to help you pay back a manageable amount of debt without being hassled by your local council. The answer is an IVA.
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Getting into Arrears on Council Tax?
Council tax is one of your most essential household bills. As soon as you miss a council tax payment, you are in arrears and owe money to your council. As council tax is considered a priority debt, you need to pay it before you pay other debts like credit cards.
Once you are in arrears unless you contact the council to discuss your circumstances, the outstanding bill can quickly escalate to court action. If your other finances are out of control, you are at risk of defaulting to your creditors.
What Is an IVA?
Individual Voluntary Arrangements (IVA) were first introduced in 1986 and are part of the Insolvency Act (1986) to help those struggling to repay their bills. They are, therefore, a formal and legislated debt repayment option that is legally binding in a court of law. Under an IVA, you agree with your creditors to pay back your debts over a fixed period by using the services of an insolvency practitioner.
How Does an IVA Work?
If you have two or more creditors, you can apply for an IVA. There is no minimum or maximum IVA debt level set out in the law, but IVAs can be expensive to set up due to fees and debts below £10,000 may be better served by other debt solutions.
An insolvency practitioner is needed to set up an IVA, and they can either be employed directly or using the services of a debt management provider. Insolvency Practitioners act as a go-between to your creditors, putting together a proposal to repay the debt by analysing the level of your assets and income.
Proposals typically include a large write off on the outstanding debt, and if all the creditors agree, an IVA may result in the repayment of as little as 20% of the original debt.
If your creditors agree to your repayment terms, it becomes legally binding over a repayment period of five years during which time creditors are unable to take any further action. The insolvency practitioner deals with all the administration of the IVA and deals with creditors on your behalf.
What Can Be Included In an IVA?
An IVA is designed for the repayment of unsecured debt, not secured borrowing secured against an asset such as a car loan or a mortgage.
Unsecured loans and unsecured debts that can be included in an IVA can consist of:
- Personal loans
- Credit card debt
- Gas and electric arrears
- Other outstanding utility bills
- Payday loans
- Debts to friends and family
- Debts to previous service providers like mobile phones and digital TV services
- Debts to HMRC including PAYE, VAT, Income tax and national insurance arrears
- Council tax arrears
IVAs And Council Tax
What many people do not realise is arrears on Council Tax can also be part of an IVA and which as a priority debt, sees local councils enforce non-payment rigorously.
What are the Consequences If I Do Not Pay Council Tax?
In the UK, although each authority may deal with council tax debts differently, there is a standard process which they all adhere to which includes:
- 1If you do not make a council tax payment within two weeks of when a payment is due, your local authority will send out an initial reminder giving seven days with which to pay.
- 2Failure to pay within seven days sees the issuance of a final notice requesting payment of your full-year council tax bill. A final notification is also sent if it is at least the third time you have been late with payments in the current year.
- 3Failure to pay following the final notice will see your local authority commence legal proceedings. It means that your council will apply to the courts to get permission to collect the debt.
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What Enforcement Methods can a Local Council Employ?
As mentioned previously, council tax arrears are priority debts, which means your local authority will use wide-ranging powers to collect it.
These include county court proceedings, removal of goods, repossession and visits by bailiffs who may choose to take the following actions:
- Enter your home with 24 hours-notice peacefully or through an open door or window
- Clamp any vehicles that are at your home
- Remove any goods that are in your home
- Issue a CCJ (county court judgement) to your credit file
If you receive UK state benefits, a court can also hold back any benefit payments which include:
- Universal credit
- Pension credit
- Jobseeker’s allowance
- Employment and support allowance
- Income support
What Should I do If A Bailiff Knocks on the Door?
A bailiff is supposed to only gain access to your home by peaceful means to repossess household goods or possessions to help repay your debt. You must not let them in by opening the front door and letting them into your property. It is doubtful that a debt collector will do a forced entry into your property over unpaid council tax although they may enter a home with a door that has been left unlocked.
How Far Back will I be Pursued for a Council Tax Debt?
There is strictly no time scale on how far back a council can look to reclaim council tax arrears. It means that a council are well within their legal rights to pursue any debt owed for an unlimited amount of time.
I Owe Council Tax, what are the Next Steps Regarding An IVA?
If you are having problems with debts that are spiralling out of control and you are unable to pay your council tax, it is essential to get guidance on whether an IVA is appropriate for your situation.
How can Jubilee Debt Solutions Help?
Did you know that Jubilee Debt Solutions can help reduce all debt by up to 80% through an IVA government-approved debt scheme and they will be able give advice whether an IVA applies to your circumstances? If you are deemed to qualify for an IVA, Jubilee will help you to draw up the services of an Insolvency Practitioner.
The role of the Insolvency Practitioner
Any Insolvency Practitioner worth their salt will be able to apply for something called an interim court order quickly. It immediately stops a creditor moving forward with legal action as an IVA is being set up.
The Insolvency Practitioner will then put down a full breakdown of your income, outgoings, secured and unsecured, preferential, and unsecured creditors assets and creditors as part of a statement of affairs. The statement is presented to your creditors and the proposal outlining how much you can pay and why an IVA should be accepted.
At a creditors meeting, 75% of the creditors need to agree to a proposal before it is accepted. Once it is accepted, you are legally bound to abide by its terms of repayment.
What is the Duration of an IVA?
As it is a formal, legislated debt solution, an IVA lasts for 60 months (five years). In particular cases, such as the receipt of a cash windfall the IVA can finish early. Similar flexibility exists with extending an IVA payment plan by up to 12 months to allow you to end making the IVA payments under the schedule.
Jubilee Debt Solutions can help arrange government-backed debt schemes IVA. Contact our friendly team now to see if you qualify for an IVA and help give you financial peace of mind.
If your finances are starting to become unmanageable and you are now unable to pay your bills, including council tax, it is vital to seek help. Citizens Advice and the National Debtline Service can provide guidance on your situation, and a Debt Management Provider can facilitate putting in place a Government Approved IVA debt scheme or help you with an alternative solution.
Do not delay. Getting debt advice and sorting out your financial circumstances today with a debt management solution like an IVA can provide you and any loved ones that financial peace of mind.
Will Local Authorities Write Off Council Tax Arrears?
Councils do possess the power to write off council tax arrears on a discretionary basis. They follow a very rigid debt collection process, and any write off would only follow on after this process.
If you cannot pay your debts, your local council may decide to accept an IVA or bankruptcy as a means of becoming debt-free. Not all councils will agree to put a formal debt plan in place.
Can I go to jail for not paying council tax?
It is extremely rare to go to prison for non-payment of council tax. A council can impose a term of 3-month imprisonment if you can make your council tax payments but refuse to do so. A local council will then apply to the courts for you to go to prison.
How will an IVA affect my credit rating?
Your credit score is affected by an IVA like any other debt solution and stays on the credit file for up to six years.
Will I lose my home as part of an IVA arrangement?
Unlike with bankruptcy, you do generally not lose your home as part of an Individual Voluntary Arrangement. If you do own your own house, an insolvency practitioner may ask you to release equity so that this can be used to pay the creditors you owe money.
Can Bailiffs force entry into my home?
Bailiffs are required to access your home on a peaceful basis. It means that they cannot force their way in, however, if you have left a door or window open, or even a door unlocked they can enter your property to seize any goods for the repayment of outstanding council tax.
Are there alternatives to an IVA?
There are other alternatives to an IVA, depending on your circumstances, which include a Debt Relief Order, a Debt Management Plan, Debt Consolidation Loans and Bankruptcy. A debt management company can provide debt advice on the most suitable solution for your circumstances.
Will an IVA help me with council tax arrears?
For an IVA to be approved, 75% of your creditors need to agree to accept the terms of your proposal. If you have two creditors, one of whom is your local council and they accept your proposal, but your other creditor does not, then it will not be approved.
Does an IVA cover HMRC?
Any outstanding debts owed to HMRC can be included as part of an IVA. Debts can include PAYE, VAT, National Insurance, and Income tax arrears