A recent report has found that council tax debts have reached £2.5bn up from £2.2bn in 2009/10. As a consequence, 32% of local authorities have instigated bankruptcy orders to recover council tax arrears representing a rise of 20% on the actions taken in 2009/10.
Based upon information provided by local authorities, 48% of local authorities instigated charging orders last year compared to 26% in 2009/10.
Charging orders enable a creditor to convert an unsecured debt to a secured debt, obtaining repayment when the debtor sells their property. Whilst such action secures the local authorities position, it doesn’t result in swift repayment and is only available where a debtor owns their own property.
The upward trend in use of charging orders by local authorities is likely to continue in light of the upcoming changes to the bankruptcy threshold.