Amber Valley Borough Council has rejected accusations from a debt management company that people are being forced into bankruptcy over unpaid Council Tax bills.
A report issued last week by Creditfix, one of the country’s largest personal insolvency practices, stated that Amber Valley is one of 55 local authorities in England and Wales that rejects Individual Voluntary Arrangements.
IVAs offer an alternative to bankruptcy whereby a company such as Creditfix makes an agreement with creditors to pay back all or part of a person’s debts, and then collects money from the debtor.
However, an IVA can only be implemented after approval by all creditors, including councils in some cases.
Creditfix head of marketing Taylor Flynn said: “At a time when local authorities are increasingly cash-strapped, it seems absurd that Amber Valley Borough Council would not consider IVAs as a repayment option.
“Of course, creditors seek to claim back what is owed – but the cost of taking someone to court, employing bailiffs and potentially re-housing families made homeless through bankruptcy is enormous.”
He added: “More than anything, it sends out the wrong message to people who are taking responsibility for their money problems and turning their lives around, rather than burying their heads in the sand.”
However, when the report was put to the council, a spokesperson said: “The council does not take any recovery action which would declare a tax payer bankrupt.
“The council does not accept IVAs because it is a part payment of a tax and 100 per cent of the tax is due. It is unfair to the other residents of the borough who pay in full and on a regular basis.”
The spokesman added: “Amber Valley Borough Council collects council tax from 57,600 households and 99 per cent of these households pay regularly and in full within the council tax year.
“There will always be households that have financial difficulties and if a council tax payer cannot pay then they should contact the council on 01773 841445 as soon as they are aware so that we can offer assistance directly.”
The council noted that the average fee charged by a company like Creditfix to set up an IVA is £1,000 plus an average payment of £1,200 for the management of payments to creditors – meaning it is a costly route out of financial trouble.
Alternative forms of support are available through the Citizens Advice Bureau, and council support arrangements such as bill reductions, repayment plans and deferrals.