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Council tax debts and your IVA

Your council tax is one of the most important household bills to deal with. In terms of your individual voluntary arrangement (IVA), it could be classed as an additional debt that’s covered by your IVA payments.

Including your council tax in your IVA is a way of ensuring that any council tax arrears you owe are covered along the way.

Why is council tax a priority?

Council tax is treated as a priority debt, whether it’s your current bill or any arrears that you might owe. Priority debts are of high importance because the consequences of not paying them are more serious than other debts.

Local authorities have extra-legal powers to collect council tax if payments are missed. They have the power to collect the debt by:

  • sending in bailiffs
  • Setting up an attachment of earnings, where the money owed is taken directly from your wages or benefits
  • issuing a charging order
  • petitioning to make you bankrupt
  • threatening imprisonment (this is rare, and usually only reserved in cases of wilful refusal to pay or ‘culpable neglect’)

Why is my council tax included in my IVA?

A court ruling in December 2013 means that when proposing an IVA (and all other insolvency solutions) your current council tax bill is classed as a debt to include in your list of creditors, if:

  • you live in a household where you’re the only person named on the council tax bill

or

  • You've entered into an IVA at the same time as your partner

What should I do if council tax is included in my IVA?

The council will normally submit their claim for the council tax bill within the first few months of your IVA.

You should continue paying your council tax as normal until you receive written confirmation their claim has been agreed and that your IVA payments will be adjusted. Once this happens, future payments to the council will stop.

This ruling only impacts you if you’re in the first year of your IVA. This is because council tax bills issued following the approval of your IVA will need to be paid directly as normal. At that point it’ll be accounted for in your budget and treated as a priority.

 

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Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

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© StepChange Debt Charity 2016