Council tax debt can be included in an IVA. However, any joint account holder will still be liable to pay the bill unless you are both starting a joint agreement.
Included in this article:
- What happens to council tax debt if you start an IVA?
- What if the account is in joint names with someone else?
- When do you start paying council tax again?
What happens to council tax debt if you start an IVA?
Any council tax you owe can be included as one of the debts in your IVA. This includes any arrears you have with the council for your current property. Also any old debts owed for previous properties you used to live in.
This debt can even be included if you have already got a repayment plan in place with the Council or their collector.
It is also normal to include any debt remaining on your current year’s bill. Although you pay this every month, the total bill itself was issued to you in advance (starting last April). As such it is a debt which can be included in your IVA.
When completing your living expenses budget, you must always add an amount for paying your monthly council tax. However, once the Arrangement is in place, you will stop paying this to the Council and instead, add it to your IVA payment. This continues until next April when you receive a brand new bill. You then reduce your IVA payment and start paying the Council direct again.
If you include your current year’s council tax bill in your IVA, remember next April, you must start paying the Council direct again when they issue a new bill.
What if the account is in joint names with someone else?
Where you are living with a spouse or partner, it is common for your council tax bill to be in joint names. If this is the case, the debt can’t just be added to your IVA.
If you include this joint debt, the creditor can and will continue to chase the other person named on the account. This will happen even after your IVA is accepted and in place. Your IVA only protects you. The other person remains liable to pay all of the outstanding balance.
In these circumstances there are two options. First, you can leave the joint council tax debt out of your IVA and continue paying it. This is acceptable even if your partner has no income of their own.
The second option is that you both consider starting a joint IVA. This is possible if your partner also has debt in their name which they are struggling to pay. Any joint debts such as the Council Tax are then covered.
A joint IVA may not be suitable if your partner’s debt is very small. In these circumstances it may be better to simply leave the council tax out of your IVA and continue paying it.
When do you start paying council tax again?
When you include council tax in your IVA, you need to remember it only covers debts in existence on the date the Arrangement starts.
In the March or April following the start date, your Council will issue you with a new bill. You must start paying this yourself (and all subsequent bills issued thereafter).
At that time, you stop paying your IVA company any allowance for council tax in your living expenses. They can no longer collect this. Instead you will need to use this budget to pay your new bill going forward. In effect, the amount you are paying into your IVA will reduce at that point.
Your council tax bill is likely to go up every year. Normally you will not be allowed to reduce your IVA payment to reflect this. If you are struggling to pay your IVA after any increases to your bills, call us for free advice.
Want to start an IVA? Give us a call (0800 011 4712) or complete the form below. The advice is free and confidential.