New IVA-council tax bombshell advice??

scared-sick

I recently got approved for an IVA and i have to say although nervous, i was relieved it all got approved.

Now, less than a month later, i get a letter from iva provider saying due to a recent court ruling, my council tax for this year must be included in the iva.

I rang up iva company to explain but all i got really was its a new court ruling affecting all new iva customers and not specific to me and nothing i can do about it.

Can anyone clear this up for me or explain better so i understand?

I am not and never have been in debt with my council tax.
All payments are up to date.
My income and expenditure has a budget for council tax.

They say because my iva was approved in may, my council tax bill from april for 2014/2015 has to be included in iva as a debt and they will get a dividend like other debts.
This is because the bill predates the iva apparently?
It gets more confusing as it only works like this for 1 year. From april 2015 i start to pay the council direct again!

I dont get it!!
I thought council tax was a priority debt which must be paid and kept up to date?
Why then are iva company making me have more debt?

They say it is a new ruling but it will affect all new iva's not just mine!

Anyone shed any light please??

DorisTrousers

Seems a little late to let you know would be my first thought?


They can include the debt, I don't have the link to hand but I am sure someone will be along to help with that presently, but in practice shouldn't be including it if in joint names, as the other party will have to pay it anyway.


If your IVA payment is £100, and the Council Tax £100, then the IVA payment will be £200 till the next bill comes in, at which point it will reduce again. Either way, you pay the same amount out per month in total as you would have done anyway, so try not to worry too much.


Hope that helps.

fermi

Due to this presumably --> http://forums.moneysavingexpert.com/showpost.php?p=64460682&postcount=1

National_Debtline

Thanks for sharing this OP. Yes I expect insolvency practitioners (IPs) like yours will be very keen to take advantage of this ruling as it means they can swell your monthly payments by the size of your council tax instalment at the start of your IVA (for up to 12 months if your IVA begins in April!)

IPs will normally recover their costs from your payments before creditors start to receive any dividends. This ruling should at least mean that those fees are paid off more quickly.

Do bear in mind that come April 2015, you will have to resume paying council tax. You may find that the IP is keen to maintain your IVA payments at the £200 mark, which would mean them trying to revise your other expenditure downwards. Some IPs are more brazen than others in this regard.

Kind regards

Dennis
@natdebtline

UpToMyNeckInIt

...That's an interesting development. Aren't lawyers great at messing things up!!!

Scared Sick: If i were in your shoes, I would write to your IP directly (forget customer service agents - their ability to use common sense varies immensely). Explain that you would be happy to include your Council Tax debt if you had one, but that as you do not, this does not apply to you.

Simple as that I would guess.

PS: If you don't mind my asking: Which firm did you opt for in the end? Seems very odd that your firm are seemingly forcing you to go into arrears with your council.

longtermplanner

UPTMNII the IP isn't making this up. There has been a change to the guidance for dealing with bankruptcy, see 40.53 in http://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch37-48/chapter40/part2/part_2.htm#40.50.

<spock mode>It is illogical that this wouldn't read across to IVAs. The interesting question is why it isn't being applied to DROs - probably answer because it would create chaos and it's in no-one's interest to push for this in DROs, but that is Unsatisfactory to those of us with a logical mind </spock mode>

fermi

longtermplanner wrote: »

It is illogical that this wouldn't read across to IVAs. The interesting question is why it isn't being applied to DROs - probably answer because it would create chaos and it's in no-one's interest to push for this in DROs, but that is Unsatisfactory to those of us with a logical mind </spock mode>

The Insolvency Service DRO unit are at present claiming that the ruling cannot apply to DROs as it does to IVAs or bankruptcy.

Anondebtadvisor

I think the main issue is that the OP was not prepared for this and was unexpected the only fault of the IP is not managing their clients expectations

DorisTrousers

Further, the OP should ensure that there is a "step" payment built into the budget/proposal. A step is normally built in to increase payments where, for example, a car HP payment or agreement to clear arrears on mortgage or rent has come to an end, and therefore it is only fair that creditors get a bit more when there is more available. However, it should, and does, work the other way, so the step is built downwards rather than up, i.e. start higher and then reduce.


Fermi, unless the position at the DRO Unit has changed very recently, they accept that the ruling does apply to DRO's, but it is probably fair to say that they would prefer that it didn't. I have been made aware of an e mail directly from them in mid April that confirms their position. If that stance has changed on this issue since then I am happy to be proven wrong on this.

fermi

You may well be right. I've not seen an update in the last few months.

UpToMyNeckInIt

Thank you all for clarifying this.

I took the liberty of asking opinion on another IVA forum over this issue. Here is the view of one rep. for an IVA company:

'The full debt for council tax/rates falls due in April but local authorities offer a concession whereby it can be paid over a 10-12 month period'.

But concedes that:

'...only in cases where the council have issued a liability order has this been successfully argued and the full debt added for the year'.

So it seems that when we get our C.Tax notices, that it is due on 1st April, and therefore anyone paying Monthly is repaying arrears at the concession of the Local Authority. So technically it is a debt.

Not sure how the ruling now affects things like waiting for liability orders to be issued.

But whilst the customer will be no worse off, your Local Council will be, with a year's worth of C.Tax payments instead boosting the coffers of your IVA firm for up to 1 year. Who would you rather had your money?

Normally, I support IVA arrangements - they are a great solution for some people. But I've got to agree with NDL on this one: This is blatant profiteering on the part of the IVA company, over an otherwise well-managed debt (will it be exploited industry-wide I wonder?).

I bet as well that some Local Authorities may subsequently be reluctant to offer monthly repayment to IVA customers, with a default like this on their record.

What next? Treat gas/electricity/water providers in the same manner? ...Same principle. (Oops, probably just given some greedy lawyer/IP some ideas).