Local authority debt

I hope this is the best place to post this, as I do not want it to become a full blown debt.

I had a personal budget from a local authority for some years, during which time it was never set up properly. You are supposed to pay contributions, which I believed I did, but as it turns out, were not paid.
Time goes by and its voided. Good stuff.

However...

Contributions were then started again and covered by them temporarily, while I had a review. I made it quite clear that I could not pay the contributions, and said to stop the budget.
The social worker, says to me: 'I will tell you the outcome next week so you don't worry'. Apparently no one has ever refused a budget and they were confused by this.
Over four weeks go by and a letter arrived demanding I pay contributions. Then I find out that there is another bill coming. So the very thing I said to stop has been put on me anyway, treating me like a common criminal.
Going back to the social worker, oh she is sorry, but you have to cancel the budget in writing. Perhaps it would have been helpful it she had done her job and informed me? Like I was waiting for?

The entire point of having a personal budget was to help negate learning difficulties, But in the end it transpired to have a budget in order to pay staff to run the budget, doing the councils job for them.
The whole thing is a disaster and has caused more stress and damage than it's fixed.
I believe that the council wants to hide this experience and hopes that I am to stupid to do anything.

I have already sent a complaints letter which has been acknowledged, but there favourite thing is collecting money without heart. I received a letter which suggests that they may take legal proceedings without specifying what.

What am I supposed to do now?