What Happens If I Can’t Pay My Council Tax Debt?

This blog answers the question “What Happens If I Can’t Pay My Council Tax Debt?” It states the series of events that follow when the council tax debt is left unpaid. The inevitable fate of accumulated council tax debt ends up with HMRC taking possession of your finances and forcibly recovering your debt.

What Happens If I Can’t Pay My Council Tax Debt?

If you are unable to pay your council tax debt, applying for bankruptcy (with a £680 fee) or getting a Debt Relief Order, remain the few possible options available to you. You must be financially eligible to consider these options for getting rid of your debt. 

Your bankruptcy status will first be used to recover council tax debt before other creditors are entertained. If all this doesn’t work out, you may also be sent to prison for a period of 3 months (which will usually be for lying to HMRC about your finances or actions like trying to dispose of your house before the “official receiver” can use it to pay off your debts), which happens very rarely.

As a consequence of failing to pay your council tax debt, you may lose your home and also dim your chances of getting a mortgage for a new one, within the next 6 years (the bankruptcy shows on your credit

What happens if I miss my Council Tax due date?

Firstly you will be served a 7-day reminder notice and at the end of this time, if you still haven’t paid, you will be paying the entire year’s council tax. There are a maximum of 2 such reminders in a year (running from April 1st to March 31st the following year).

 If you fail to pay the entire year’s tax the council can ask the magistrate for a liability order. You can go to court and explain the reasons for your non-payment, if they are acceptable.

If this is not the case and the reasons you give to the council for missing the payment are not accepted the council can apply to take money from your Universal Credit, Income Support, Pension Credit, Jobseekers Allowance, and Employment and Support Allowance.

Beyond this, the Council can send bailiffs to seize your property if there is no other way to recover your council tax through legal proceedings.

How Do I Apply To Become Bankrupt?

You can only apply to become bankrupt online by clicking here . The fee for claiming bankruptcy is £680. Your application needs to be supported by the following documents:

  • Copies of your latest utility bills including council tax, gas, water usage (your property’s rateable value multiplied by the tariff charge), and electricity bills.
  • Details about the benefits you are receiving. Also information about any pension age support payments you might be on.
  • Copies of your payslips (these show the number of hours you have worked)
  • Copies of letters from a bailiff, who has attempted to make you pay off your council tax debt 
  • Copies of any unpaid council tax bills from previous years
  • Fines that you have received from a court (which may be the crown court or your county court etc). These fines will be entered as part of your outstanding debt while going into bankruptcy.
  • Details of your unpaid debts may include credit card debt, mortgage debt, council tax debt, or student loan debt.
  • Copies of your credit card statements
  • Copies of any hire purchase agreements you have entered into (stating the agreement status in case of entering into personal bankruptcy)
  • Details of any loan repayments you still have to make
  • A copy of your (current year’s) council tax bill (unpaid or partially paid)
  • Copies of rent agreements with your landlord.
  • Copies of any mortgage agreements to document mortgage repayments that need to be made in the future.

Your online application containing this uploaded and scanned documentation evidence can be saved. It will be complete for submission once you have paid the £680 fee (in full). Help or advice for filling out a bankruptcy application form can be obtained from the Money Helper website.

Your financial condition for bankruptcy must be such that the value of assets or money in your possession (as well as any future income or benefits payments) should be lesser than the amount of debt you have accumulated.

The bankruptcy period is usually 12 months. Before applying for bankruptcy, you must assess your financial situation to decide if bankruptcy is the right decision for you or not. This includes checking:

  • The amount you will have to pay for the process
  • The debts which are written off by bankruptcy (the official receiver pursuing you to clear these debts will be permitted to use all your finances to pay them off as quickly as possible)
  • How the bankruptcy might deprive you of your home, personal assets, and finances
  • Look at how you had been managing your debts before going bankrupt (the official receiver needs this information to judge your situation)

Which debts will I still need to pay off after applying for bankruptcy?

The debts you will still need to pay off after applying for bankruptcy include:

  • Financial Aid loans to cover education costs
  • Fines payable to the court (for offences committed, as compensation or as fixed penalties payable to the magistrate’s court). These must be paid by their mentioned due date, even if it lies within the time period of your bankruptcy status
  • Repayment of mortgages or any other financial debt piled up while purchasing or renovating your home
  • Rent arrears accumulated with your landlord (for which they will have evidence of notifying you in advance). Your landlord cannot be prevented from evicting you for nonpayment of rent within the bankruptcy period.
  • Repayments for something which you have purchased on a hire purchase agreement. Some hire purchase agreements state that the goods you have bought under this agreement will be taken back if you apply for bankruptcy status. In this case, you might be able to renegotiate the agreement to either keep making the payments as before or pass on the repayments to a family member or friend.

 In case the seller doesn’t agree and chooses to repossess the sold item, bankruptcy will cover any remaining debts.

  • Debts or funds owed to a financial entity or individual in the European Union. In light of the recent legal changes, an EU creditor will need to sue in the United Kingdom to get their money back. If you have a property in a European Union country with a mortgage obtained from an EU lender, they can initiate legal proceedings against you from their home country.

Do I need to know what will happen to the money in my bank accounts and to my utility bill status?

Yes, it is very important for you to know what happens to the money in your bank accounts and to your monthly utility bills during your 12-month bankruptcy. During the bankruptcy period, you will be able to keep enough money to cover your daily living expenses.

The “official receiver” takes control of the rest of your finances. Once the bankruptcy order is issued your bank accounts are immediately frozen, which implies:

  • Your bank may prevent payments from coming into or going out of your account
  • You must immediately cease using your bank account cheque book, credit card, or debit card
  • In case the official receiver asks for your cheque book, credit card or debit card, you must immediately hand them over.

The official receiver passes on your bankruptcy notification to your electricity, water and gas suppliers as well as to your local council (for council tax change of circumstances). Your council tax payments will be paused for 12 months and will resume in April of the next year.

Your utility bill companies might ask you for some type of financial security or advance payment (for the bills of the upcoming 12 months).

Any savings which you have will go into repaying your debts. While you are bankrupt, you will not be permitted to borrow an amount exceeding £500. The bankruptcy will stay on your credit reference file for 6 years after you are declared bankrupt.

Should I know what will happen to my house after I become bankrupt?

Yes, to avoid the risk of ending up homeless, it is crucial to know what will happen to your house after you become bankrupt. The official receiver is in charge of deciding what happens to your assets during bankruptcy, your home is also part of this mandate.

It must be kept in mind that you might be unable to get a mortgage for the next 6 years (from your date of bankruptcy) as the bankruptcy stays on your credit report for that period of time. Although the chances of getting a new mortgage within 6 years are rare, you might also end up succeeding in doing so if your credit rating improves in the future.

The official receiver may decide to sell off your house to pay off your bankruptcy debts. In case you try to outsmart the official receiver by attempting to sell your home for a lower value than its council tax band or try to dispose of it by other means, the following penalties will be applied:

  • The official receiver will ask the court to issue a “Bankruptcy Restriction Order” against you. A Bankruptcy Restriction Order extends your bankruptcy restrictions beyond the original 12 months to a period of between 2 to 15 years. It also condemns you to further financial constraints
  • The official receiver could force the buyer or possessor of your property to return it
  • The official receiver may charge you with a court fine or order the court to send you to prison.

Which belongings will I be allowed to keep with me after bankruptcy?

There are some belongings that the official receiver cannot sell, known as exempt belongings. You will be allowed to keep this with you after bankruptcy. Exempt belongings include:

  • Your clothes
  • Your bed linen
  • Your household furniture
  • Any vehicle that is being used to care for a dependent occupant of your residence
  • Work-related belongings such as essential stationery, your office laptop, briefcase, sports gear for professional players, and construction site gear or tools for factory workers
  • Household cooking utensils or essential bedroom, and bathroom items which every basic accommodation requires to be used on a daily basis.

The official receiver is permitted to sell items that aren’t required for your job or everyday housing chore purposes such as :

  • Jewelry
  • Antique items
  • Mobile homes or caravans (if you are living in them)
  • Entertainment gadgets such as cameras or gaming equipment. Expensive sound or home theatre systems and handheld games.

Other than this the official receiver might be permitted to sell off your personal property in another country. Your passport can also be taken away if the court fears you might abscond to escape bankruptcy proceedings.

All your other belongings become possessions of the official receiver. The official receiver’s task is to sell these off to cover your debts.

Other formalities of bankruptcy proceedings include:

  • Being bound by all of the bankruptcy restrictions on your bank account, credit cards, personal belongings, and borrowing restrictions (limited to £500), also you cannot work as an insolvency practitioner or work as a director of a business entity.
  • Your name and personal information are published in the Individual Insolvency Register
  • Getting a copy of the bankruptcy order and appearing for an interview with the official receiver in which they will verify the information that they have received about your debts and income, inquire about why and how you have ended up bankrupt, and obtain details about your pension and savings

Why have I received a Reminder/Final Notice/Summons?

A final notice is issued if you fail to make the payments of an instalment by the date they are due. The Reminder Notice tells you to bring your account up to date within 10 days

The final notice cancels your monthly instalments and you have to pay the entire year council tax together as a lump sum.

If the payment is not made within 7 days of the reminder notice a summons may be issued.

If you owe council tax £5000 or more, an insolvency proceeding may be initiated against you

Will council tax contact me?

Council tax will contact you in a period of 7 days after you have missed your monthly payment.

Council tax bills are delivered to taxpayers in March every year, people who miss their payments are given a period of 7 days to comply and then legally compelled to pay the entire year’s council tax. 

So council tax can take you to court for legal proceedings and then the court decides the case given your reasons for non payment. An individual cannot directly be visited by or reached through telephone, email or mail except to be served a notice or reminder. 

The legal proceedings for non payment are conducted by the Crown Prosecution Service, not by council tax.


This blog post addressed the question “What Happens If I Can’t Pay My Council Tax Debt?”If you are unable to pay your council tax debt you will be issued a court order to face legal proceedings. The court will hear your reasons for nonpayment and if they are not found plausible, make you pay the entire year’s council tax in one go.

If you again fail to do so, another court summons will be issued against you. In case you owe HMRC £5000 or more, an Insolvency Proceeding will be initiated against you. This case is heard by the Crown Prosecution Service and the resulting insolvency proceedings will (let the court) take control of your finances and use them to forcibly pay off your accumulated debt.

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Frequently Asked Questions (FAQs): What Happens If I Can’t Pay My Council Tax Debt?

What is the Funeral Expenses Payment?

The Funeral Expenses Payment provides you with help to cover expenses incurred to arrange for a funeral. The eligibility conditions for receiving a Funeral Expenses Payment include:

  • Being eligible for claiming certain benefits including Income Support, Universal Credit, Pension Credit, Housing Benefit, Child Tax Credit, income-related Employment And Support Allowance, Working Tax Credit (disability or severe disability element), or the income-based Jobseekers Allowance.
  • In Conformation with the rules regarding your relationship with the deceased. These rules are being a partner of the deceased person, being a parent (or person with parental responsibility) of a deceased child who was aged 16 years or under, and being a parent of a baby stillborn after 24 weeks of pregnancy.
  • The funeral you will be arranging will take place in Switzerland, the UK, or in the 27 EU countries plus Iceland, Liechtenstein and Norway.

The Funeral Expenses payment partially covers the following expenses:

  • Travel expenses for going to the funeral (in another country or within the council). The commuting expenses for making funeral arrangements are also included.
  • Cremation charges (averaging between £790 and £1554 at their cheapest) and any payments made in acquiring the doctor’s certificate including a postmortem/autopsy fee. The costs of getting the doctor to sign the medical certificates for cremation (£164) are also covered.
  • Burial charges (averaging at a maximum of £5033 in London and a minimum of £1249 in East Midlands UK)
  • Costs incurred in obtaining death certificates or other documents relating to the deceased.
  • Expenses of transporting the dead body (within the UK) if the remains have to be taken beyond a distance of 50 miles.

What Is A Bankruptcy Restriction Order?

A Bankruptcy Restriction Order is a court order used to punish any fraudulent activity by the person undergoing bankruptcy such as (under The Insolvency Act 1986 section 358 Bankruptcy Offence) Fraudulent Disposal of Property or Absconding.

Reasons for getting a Bankruptcy Restriction Order being made against you may include:

  • Getting rid off your assets for less than their actual value ( with the intention of preventing the official receiver from selling them off to recover your unpaid debts)
  • Lack of conformity with the demands of the official receiver (Section 353 – Non Disclosure and Section 356 False Statements)
  • You have in the past borrowed funds which you knew you could not pay back on the given repayment schedule.
  • Having paid off your creditors in the wrong sequence (with reference to priority debts). 
  • Fraudulent financial behaviour (which may include falsifying credentials or credit rating to obtain loans or mortgages)
  • Deliberately ignoring your finances so that your debts increase due to mismanagement.

The issuance of a Bankruptcy Restriction Order will extend your bankruptcy status restrictions for a period of between 2 and 15 years.

What is a Bankruptcy Restriction Undertaking?

A Bankruptcy Restriction Undertaking has the same effect as a Bankruptcy Restriction Order with the only difference being that you will not be taken to court. If you accept the allegations made against you in the letter by the official receiver within a period of 21 days you can offer to enter into a Bankruptcy Restriction Undertaking. This prevents the BRO from taking effect.

The restrictions which you face as a result of a Bankruptcy Restriction Undertaking include:

  • Not being able to serve on various educational posts such as school principal, university professor or lecturer
  • Not being able to secure employment in various posts in the health sector
  • Borrowing restrictions (limited to £500)
  • Not being able to work as an insolvency practitioner or as a Director of a company
  • Unable to be appointed as a trustee of a charity or pension scheme


The Insolvency Act 1986

Section 283 Definition of Bankrupt’s Estate

Section 284 Restrictions on Dispositions of Property

Section 322 Proof of Debts

Section 328 Priority of Debts

Section 357 : Bankruptcy Offence : Absconding

Section 358 : Bankruptcy Offence – Fraudulent Disposal Of Property

Parental Responsibility under the Children Act 1989