Council tax arrears gets included in trust deeds in Scotland. These debts often feature in people’s list of creditors. Other formal debt solutions (described below) also address this type of debt.
Local authorities are quick to employ aggressive debt collection methods. Dealing with debt can become an urgent priority in this situation. A trust deed can prevent (or stop) council tax debt enforcement. We’ve helped many people to deal with this type of debt. If you’d like expert debt advice, please get in touch.
Local authorities are usually supportive of those starting trust deeds. Objections aren’t common. They understand that solutions are required to deal with problem debt. Like other creditors, they review your personal situation and payment proposal. Local authorities usually accept fair proposals. Your protected trust deed helps them to recover part of the debt.
However, any creditor can object to a trust deed becoming protected. Objections from several smaller creditors (or from one large one) could prevent protection. Good advisers will warn you in advance if creditor objection is likely.
Local authorities are quick to take action when people get into arrears. Debt enforcement in Scotland is termed “diligence”. The most recent official diligence statistics make shocking reading. 88% of diligence in Scotland in 2018-19 related to council tax debt. Councils provide Sheriff Officers with the majority of their work. Consumer credit lenders (like banks and credit card firms) use legal recovery action much less often.
You’ll receive a final demand for council tax payment. The local authority will apply for a Summary Warrant if you don’t pay up. You’re served with a Charge for Payment that gives you a final 14 days to pay the arrears. If the debt still isn’t paid, enforcement action can begin. There are several types of enforcement action used to recover council tax debt:
• Wage Arrestment. This process is also termed an Earnings Arrestment. Your employer is required to make deductions from your salary. As well as reducing your take-home pay, a wage arrestment could cause embarrassment at work.
• Bank Arrestment. Your bank is instructed to freeze the money in your account. If there’s more than £529.90 in the account, the additional balance could be taken to repay your debt. A frozen bank account can cause severe personal disruption.
• Attachment Order. This enables a Sheriff Officer to “attach” property kept outside your home. This includes property kept in garages or sheds. Vehicles are a common target. Attachment doesn’t result in immediate removal of the goods. If you fail to pay, your property can get removed and sold later.
• Exceptional Attachment Order. This option is a last resort and requires approval from the sheriff court. Under exceptional attachment, non-essential goods get removed from inside your home. If you fail to pay, your goods can get sold.
• Inhibition. An inhibition prevents you from selling or transferring ownership of a property. You’ll be unable to take out further loans secured against your property. Inhibitions remain in place for 5 years. They can get renewed by the creditor after 5 years.
• Bankruptcy. This process is also termed sequestration in Scotland. It’s a particular threat to homeowners. It also poses a serious threat if you own a car worth more than £3,000. If you’re made bankrupt, your assets can get sold to repay your debts. A Scottish trust deed may deal with your assets more flexibly than bankruptcy.
If you get expert advice, it’s possible to stop enforcement action. It’s important to act quickly to bring your council tax debt back under control. Your options include:
• Negotiating a payment arrangement directly (before enforcement begins).
• Time to Pay Order. You can complete a time to pay application form. If the court makes the order, you can repay the council tax arrears in instalments. It also stops most types of enforcement action.
• Moratorium. If you get debt advice, your adviser can apply for a moratorium. This protects you from legal action for six weeks. Moratoriums provide breathing space to put a debt solution (such as a trust deed) in place.
Couples are usually jointly liable for council tax debts. This means you’re each responsible for the full balance owed (not 50% each). You’ll both need to act to stop enforcement and arrange a suitable solution. Click the following links for more information on joint debts and joint protected trust deeds.
Applying for bankruptcy also addresses your council tax arrears. Depending upon your situation, bankruptcy could be the most suitable solution. If you have no surplus income, bankruptcy requires no monthly payment. It may also be suitable if you own few assets. The application fee is £200, though this fee gets reduced to £90 in some circumstances.
The debt arrangement scheme (DAS) also deals with your council tax debt. A debt payment programme (DPP) provides time to affordably repay your debt. Importantly, DAS also provides legal protection from your creditors. It may be suitable if you can repay your debts within a reasonable time period. It’s often used by homeowners (with equity) to avoid personal insolvency.
A debt management plan (DMP) does not provide legal protection from creditors. Because council tax recovery can be harsh, a DMP may be unsuitable. It could help to reduce your other debt repayments. This could make it affordable to agree a repayment plan with your local authority. However, DAS provides more guarantees and protection than debt management.
Formal debt solutions deal with your council tax arrears. You’ll still need to pay the new council tax that becomes due in the future. A Scottish trust deed budget covers your household bills. An allowance gets made for your future council tax payment. This helps to prevent you from getting into arrears again.
If you’re struggling with council tax debt, please get in touch. We’ve been helping people with council tax arrears since 2007. You’ll get advice and information about suitable debt solutions. For a confidential chat with a sympathetic debt expert, please contact us.