The ever-growing mountain of consumer debt in the UK has been hitting the headlines recently, with much media attention focusing on payday loans and other forms of unsecured lending. But recent statistics released by the Citizens Advice Bureau (CAB) tell a different story as, for the first time, council tax arrears are outstripping other types of debt.
According to CAB, 20% of all people contacting them for help with debt are having problems with council tax. Between January and March 2014, the charity dealt with more than 27,000 enquiries from people struggling to pay their council tax bills – a 17% increase on the same period in 2013. And overall, CAB responded to a massive 90,000 requests for help with council tax arrears last year.
CAB isn’t the only organisation to pick up on this trend. The figures are mirrored by another leading debt charity, Step Change, who’ve seen a huge 77% increase in the number of people seeking help with council tax-related debt problems over the last 12 months.
Sadly, the problem seems to stem from a change in government policy which has cut the amount of help available with council tax payments for many people across the country. In March 2013, the previous system of council tax benefit was abolished and replaced with a new scheme called council tax support.
This change has had two key consequences for consumers:
- The overall budget for help with council tax payments has been slashed, so a much smaller pot of money is now available. This means that fewer people now qualify for help and those that do qualify may get less help than before.
- Council tax support is means-tested and operated by individual councils, rather than central government. This has led to local variations as to how the system is applied, with people in some parts of the country less likely to qualify for assistance than others.
CAB Chief Executive Gillian Guy explains the link between the government’s legislative changes and the surge of council tax-related enquires that the charity is receiving: ‘Consumer debts like credit cards and personal loans have traditionally been the most common debt problems that come through our doors, but since the end of council tax benefit we’ve seen council tax arrears problems go through the roof.’
Ms Guy goes on to describe how council tax can now be the ‘tipping point’ that causes consumers who were otherwise managing to stay on top of their finances to fall into debt. This is borne out by the fact that, of everyone who contacts CAB about council tax arrears, at least a fifth are having problems with other debts as well. These include personal or payday loans (21%), fuel bills (18%), credit or store cards (16%) and mortgages or secured loans (5%).
So what happens if you don’t pay your council tax and fall into arrears? Your local authority can instruct bailiffs to call at your home to try and collect the unpaid monies. Or, they might apply to the court for a payments order for deductions to be made from your salary, wages or other income source. In the worst case scenario, the council could even try and force you into bankruptcy.
On a brighter note, help is on hand from Bankruptcy Clinic. We work in partnership with Debt Release Direct, a leading debt management firm, to identify and implement the right answer to your debt problems. MoneySolve Ltd offers a wide range of debt solutions and expert help from their team of friendly, fully-qualified debt advisors.
Which debt solution is right for me?
It all boils down to the amount and nature of your debts and your personal financial situation. However, your options might include:
- Bankruptcy. If you have no money or assets with which to repay your debts, this could be a possibility. Your debts could be cleared after just 12 months and creditor hassle will stop.
- Individual Voluntary Arrangement (IVA) and Trust Deeds. These are binding agreements to repay your unsecured debts over several years. You’ll be legally protected from your creditors and any remaining debts will be written off when the arrangement finishes. IVAs are for England and Wales and Trust Deeds for Scotland.
- Debt Relief Order (DRO). A way of dealing with debts worth less than £15,000 if you have no disposable income and you’re not a homeowner. However, you’ll need to meet a set of strict criteria to qualify.
- Debt Management Plan (DMP). A flexible, informal solution which can help reduce your monthly payments to creditors so they become manageable.
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