A local authority can use bankruptcy as a method of debt collection, when dealing with council tax arrears. However, there are certain circumstances in which such a course of action will be frowned upon by the courts. 


In 2008 the Local Government Ombudsman found in favour of a complainant who had been made bankrupt for failure to pay council tax, on the basis that the council had not given him adequate warning of the consequences of bankruptcy, and had failed to properly advise him to consider the alternative of seeking a charging order on the property. That ruling was followed by a county court decision involving a case in which the debtor had Huntington’s disease and had withdrawn from the world; in the judge’s view the council had not properly explained its discretionary decision to invoke bankruptcy proceedings, and the court was entitled to invoke provisions in the Insolvency Rules 1986 dealing with mental and physical disability. As a result, bankruptcy proceedings were stayed. Since then, there have been a few other cases in which the court has annulled bankruptcies (the council then having to pay the costs). 


The clear message that emerges is that the courts will often be unhappy about the use of bankruptcy proceedings as a means of debt collection for council tax arrears; if there is a suggestion of physical or mental disability then alternative remedies should be pursued. For the full authority see [2010] LSG 18 November 19.