More councils using bankruptcy orders to chase council tax debt

A third of local authorities used Bankruptcy Orders last year to recover council tax arrears, new research has revealed.

Figures obtained by Moore Stephens show that 32% of local authorities took bankruptcy actions against council tax defaulters, making more than 1,000 tax defaulters bankrupt in 2013/14.

Nearly half (48%) of local authorities also used Charging Orders last year, allowing them to receive payment of council tax debt from the proceeds of a house sale or remortgage.

‘Council tax debts are now approaching unsustainable levels, and local authorities are no longer able to stand by while defaults continue to mount,’ said Moore Stephens partner, Michael Finch.

‘As the economy recovers, local authorities are suffering more and more with ‘serial debtors’ – a hardcore of people who have no intention of paying council tax or clearing their debts. That leaves councils with very few options other than petitioning for them to be made bankrupt.’

Mr Finch warned that the recent increases in the bankruptcy threshold from £750 to £5,000 would make it harder for councils to use bankruptcy proceedings to recover council tax debt.

He said: ‘There is a strong case for public sector carve-out for the new bankruptcy threshold, to make sure that local authorities are not prevented from bringing in the vast quantities of small debts they suffer from serial debtors.’

Official statistics from the Department for Communities and Local Government showed council arrears rose to £2.5bn last year.