Bankruptcy

This fact sheet is aimed primarily at council tax payers who have been threatened with bankruptcy proceedings to recover council tax arrears.

The council has been threatening me with bankruptcy proceedings. Can the Ombudsman help?

In some cases, yes. We can deal with some aspects of the council’s approach to recovering debts. Often the debt is arrears of council tax. (See also our fact sheet on council tax, and our Focus report 'Can't pay? Won't pay? Using bankruptcy for council tax debts').

Taking bankruptcy proceedings is one of the options available to councils for recovering a debt, although generally would be a last resort. We cannot stop the council taking bankruptcy proceedings but we can consider whether it has followed the procedure properly. But only part of the process is within the Ombudsman’s jurisdiction: we cannot investigate court proceedings.

We can consider what happened up to the point that the Bankruptcy Petition is issued by the court. Any events after that are, by law, outside the Ombudsman’s jurisdiction, which includes actions of a Trustee in Bankruptcy and any costs payable to them or a court.

If the money you owe is arrears of council tax we can consider, if appropriate, whether the council dealt properly with your council tax and council tax benefit.

We can consider also whether the council followed the procedure properly in deciding to take bankruptcy proceedings, and whether it took the right steps after that, up to the point that the Bankruptcy Petition was issued.

How do I complain?

You should normally complain to the council first. Councils often have more than one stage in their complaints procedure and you will usually have to complete all stages before we will look at your complaint.

Then, if you are unhappy with the outcome, or the council is taking too long to look into the matter – we think 12 weeks is reasonable – you can complain to us.

You should normally make your complaint to us within 12 months of realising that the council has done something wrong.

To complain to the Ombudsman phone our helpline on 0300 061 0614 (8.30am to 5.00pm, Mondays to Fridays). You will be able to discuss your complaint with one of our advisers. You can text us on 0762 481 1595.

You can complete an online complaint form.

If you can consider my complaint, what will the Ombudsman look for?

We will consider the individual circumstances surrounding your complaint and the council’s approach. This might include looking at whether:

  • the council has been in touch with you to allow you an opportunity to explain your circumstances, and if appropriate, to settle the debt
  • the council considered properly any information you provided
  • you have made a claim for council tax benefit, and if so, whether the council properly considered the benefit position
  • the council checked with adult social care to see if you have any needs relating to your physical or mental health and whether the council should have suspended the proceedings in order to consider new information, and
  • the council kept records of its decision making and how it considered if bankruptcy was a reasonable approach.

What happens if the Ombudsman finds that the council was at fault?

It depends on what went wrong and how that affected you.

  • For example, if we found that the council failed to take some important information into account (and otherwise it may not have taken bankruptcy proceedings) we could ask the council to suspend the action while the information is considered.
  • In appropriate cases, we can recommend that the council pay compensation. The level of compensation will depend on the how badly the council’s wrong-doing has affected you.

Examples of some complaints we have considered

Mrs G had severe mental health problems and was known to the council’s community mental health team. She owed just over £5,000 council tax, and after other recovery methods had failed the council obtained a Bankruptcy Order. During the proceedings Mrs G’s sister was writing to the council explaining that she had mental health problems and could not manage her affairs. We found maladministration in that the council did not record adequately why the bankruptcy route was chosen, or what checks had been made into Mrs G’s circumstances, in particular with adult social care. We recommended that the council should apply for an annulment of the Bankruptcy Order, and consider how it could recover the debt by other means.
Mrs A received council tax benefit but owed council tax because a working adult lived with her. The bailiffs failed to make contact with Mrs A. Checks made through council records did not show Mrs A had any particular difficulties. The council then took bankruptcy proceedings. At this point a relative advised the council that Mrs A had a mental illness which led to her ignoring bills and correspondence. But we did not find fault because we decided that the council could be judged only on what it reasonably could have known at the start of the bankruptcy proceedings.

Other sources of information

The Insolvency Service has lots of useful information about what happens if you are made bankrupt. See https://www.gov.uk/government/organisations/insolvency-service.

Our fact sheets give some general information about the most common type of complaints we receive but they cannot cover every situation. If you are not sure whether we can look into your complaint, please contact us.

The Local Government Ombudsman provides a free, independent and impartial service. We consider complaints about the administrative actions of councils and some other authorities. We cannot question what a council has done simply because someone does not agree with it. If we find something has gone wrong, such as poor service, service failure, delay or bad advice and that a person has suffered as a result the Ombudsman aims to get it put right by recommending a suitable remedy.

March 2013 

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