Council tax arrears are treated in the same way as any other debt if you go bankrupt. They are included and will be written off unless the account is in joint names.
Included in this article:
- Is council tax debt written off if you go bankrupt?
- Does a joint account holder still have to pay the debt?
- What happens to your current council tax bill?
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Is council tax debt written off if you go bankrupt?
When you go bankrupt, any council tax arrears you owe is included. It will be written off in the same way as other unsecured debts you owe.
This is the case regardless of whether the arrears is for your current property or whether the debt is older and associated with a different property.
As long as it’s in your name, you will be protected from any further collections or enforcement action.
Any legal action currently being taken against you by the council to collect council tax arrears must stop.
If bailiff has already been instructed and visits your home, you simply tell them you are bankrupt. They will have to leave your premises immediately. They can’t demand further payment from you.
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Does a joint account holder still have to pay the debt?
Where your council tax debt is in joint names, the situation becomes more complicated.
The issue is that when you go bankrupt, you are protected from your debts. But this only applies to you personally. No-one else. The other named account holder of any joint debts you have – including council tax – remains liable for the full outstanding amount.
Because of this, the council is still legally allowed to chase them for the debt owed. If they are unable to pay pay it, they will need to agree a repayment plan with the council.
Where a repayment plan is not suitable, the joint account holder will need to consider starting their own debt solution such as an IVA or going bankrupt themselves.
After you go bankrupt, the other joint account holder is still responsible for 100% of any council tax debt owed. It outstanding debt is not split in half.
What happens to your current council tax bill?
Because your council tax bill is issued in full at the beginning of the tax year (in April), the current year’s debt is also included in your bankruptcy. This is the case whether you are in arrears or not.
If the bill is in your name only, you will be told to stop making further monthly payments direct to the council (even if you are currently up to date). However, you can’t keep the money.
You will be required to make your council tax payment to the official receiver (OR) instead. This arrangement will continue until the end of the tax year. When your new council tax bill is issued (in March/April following the date you went bankrupt), your payments to the OR will stop and you must pay the new bill as normal.
In limited circumstances of financial hardship, the OR might let you keep some or all of the money you would have otherwise paid towards your council tax. This is reviewed and decided on a case by case basis.
The above guidance does NOT apply if your council tax bill is in joint names. In these circumstances, you must both maintain the ongoing monthly payments as normal. The joint account holder is still liable to pay the bill.
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My son has gone bankrupt, yet a debt company are still chasing him for council tax arrears, they have said that although he’s bankrupt they will come and seize goods or it can be paid off by a third party is this correct
Hi Susan
Any council tax arrears you son had in his own name at the time he went bankrupt are certainly included and can no longer be collected by the council. As such he has nothing to worry about.
If the council are still trying to collect, it is possible that they do not realise he is bankrupt. He should speak to them and confirm his bankruptcy reference number and tell them to contact the Official Receiver for more information.
In addition he should contact the examiner at the official receiver’s office who is dealing with his case himself and let them know. They should be able to write to the council if they have not already done so.