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Council tax debt and a debt management plan

Council tax debt and a debt management plan

It is not usually possible to include council tax arrears in a debt management plan. A separate payment plan will need to be set up to cover this debt.

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Can council tax be included in a debt management plan?

Local councils will not normally agree to council tax arrears being included in a Debt Management Plan (DMP).

An offer to include this type of debt in your Plan will normally be rejected. The reason for this is the council will argue it will take too long to repay the amount your owe them.

The only time it is possible to include this type of debt is if the arrears are from a previous property and you are now living on an area run by a different council.

Could a debt management plan still help?

A debt management plan could still help with repaying council tax debt if you have other unsecured debts like credit or store cards and loans.

You could reduce the payments you make to all these debts by putting them into a Plan. This may then free up sufficient funds to allow you to set up an addition repayment plan direct with the council to pay off your arrears within a reasonable time.

This solution will work as long as you have sufficient funds to agree a payment to the council and at least the minimum acceptable payment into your DMP.

You also need to ensure you have enough money to pay your ongoing living expenses including any ongoing council payments.

Alternative solutions for council tax debt

If you can’t afford to pay both your council tax arrears plus a minimum debt management payment, the solution described above won’t work for you. In these circumstances there are different options available which do not require you to set up a separate payment plan with the council.

The first of these is an IVA. Council tax arrears are included in an IVA. You offer to pay back as much of your debt as you can over a fixed period (usually 5-6 years).

If you’re not a home owner and living in rented accommodation, you should also consider going bankrupt. Despite what you may think, in theses circumstances, bankruptcy can be an ideal solution.

All council tax and any other unsecured debt you owe would be written off. In addition, you don’t have to make any further monthly payments towards any of your unsecured debts if you can’t afford to.

A Debt Relief Order will give the same benefits as going bankrupt and is cheaper to implement. However, this option isn’t suitable for everyone because you have to meet strict acceptance criteria.

Will you be evicted from your council house?

Falling behind with your council tax will not affect your council house. You will not be at risk of eviction unless you get into significant rent arrears.

That said, you can’t just ignore the debt. If you don’t sort it out, the problem can get very serious. The Council could ultimately instruct a bailiff to visit your property which could put your car and other possessions at risk.

Using a debt management plan to reduce your other debt payments may free up the funds you need to agree repayment with the council.

Struggling with council tax debt? For free confidential advice, call us (0800 044 5407) or complete the form below.

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