Renters hit by council tax arrears

Families forced to rent rather than buy are falling behind on their council tax.

The debt advice charity, the Consumer Credit Counselling Service (CCCS), says it recorded a 27 per cent jump in England last year in people asking for help with council tax arrears.

It says much of rise has been fuelled by the worsening financial position of families renting their homes. For the first time more renters then homeowners contacted the charity with council tax problems.

The numbers calling CCCS for help increased from13,353 in 2010 to 16,958 in 2011 - despite the fact that many English councils have frozen council tax.

The average amount owed in council tax arrears has also increased, from £675 to £717.

Council tax is a priority debt to deal with because there's a danger or bankruptcy or bailiffs being called in, so here's some official advice.

Plus pointers from...

Payplan and Citizens Advice

Surge in Debt relief Orders

The Insolvency Service has reported a sharp rise in the number of people seeking Debt Relief Orders, a cheap form of bankruptcy for people with few assets. They reached a record level of 7,600 in the three months to September.

Debt Relief Orders or DROs were brought in two years ago to provide a route out of debt for the poorest people in financial trouble.

The process costs just £90, much cheaper for the debtor than bankruptcy, and is only open to those with less than £300 in assets as well as a low value car.

While bankruptcies have fallen sharply as families batten down the hatches and cut spending, the numbers at the bottom of the pile seeking protection from creditors is on the rise.

Mark Sands, from insolvency experts, RSM Tenon, said, "It shows how many people are so desperately short of money that they qualify for DROs."

The total figure for individual insolvencies was down 11 per cent compared with the thrid quarter of 2010.

But with financial pressures building, the Consumer Credit Counselling Service (CCCS) fears there will be a surge in insolvencies next year.

Help if the energy bill is a problem

Scottish & Southern is bringing in its prices rises from today. Eon's price hikes came in yesterday and npower's arrive on 1st October. Scottish Power and British Gas tariffs have already gone up.

The CCCS (Consumer Credit Counselling Service) says that a third of people with debt problems are also in fuel poverty - they're struggling to pay their bills.

If you're having trouble paying for gas and electricity, here are some places to go to for help:

Home Heat Helpline 0800 336699

CCCS Debt Remedy

My Money Steps

British Gas, Scottish Gas Trust

Other British Gas help
And check with your supplier for help, if it's another one.

Winter Fuel Payment

Cold Weather Payment

£700 to go bankrupt

A rise in the cost of going bankrupt could discourage people with financial problems from seeking a solution, debt experts are warning.

The fee for petitioning for bankruptcy has gone up by £75 to £525. With the court fee added on, the total upfront cost is £700.

The deputy head of the Insolvency Service, Graham Horne, says the increase is needed to "cover the overall cost of administering the service".

The charges, including court fees, have gone up by 37% since March last year.

A leading insolvency practitioner, Mark Sands from RSM Tenon, warns that the hike would put extra pressure on individuals who are likely to be under stress or depressed.

"So many people flounder around and don't see a way out," he says, "They are going to be put off exploring bankruptcy as a solution."

The £525 charge is a deposit to cover the cost of managing a bankruptcy, which allows the bankrupt to throw off the burden of debt and make a fresh start.

The Insolvency Service recovers a full administration fee of £1,715, less the deposit, from the bankrupt's assets or surplus income at a later stage. This sum is not being increased.

"The fee is staying the same," argues Graham Horne, "But we are increasing the proportion of that fee which we get on day one."

The Insolvency Service has seen its income squeezed because of the falling value of homes and other assets which are recovered from bankrupts.

Currently, the £1,715 fee is never fully paid in half of bankruptcies.

"It's unfair to families who are struggling," said a recent bankrupt who spoke to BBC News, although he added, "I felt that any money I had was going to be taken anyway."

"This increase in the cost of going bankrupt is likely to swell the numbers of people falling through the net of the current insolvency regime," comments Jon Elwes from the Money Advice Trust.

"Our advisers at National Debtline speak to people everyday for whom bankruptcy would be the best solution to their debt problem, but for the fact they can't afford the associated fees."

There is now a cheaper and easier alternative, the Debt Relief Order or DRO, which costs only £90.

An increasing number of people in financial trouble and looking to escape their debts have been avoiding bankruptcy and taking this lower cost route.

In the first quarter of this year there were 6,788 Debt Relief Orders, a 20% rise on the previous year.

But you can only ask for a DRO if your debts are under £15,000 and your savings and assets are less than £300.

"What if you have £16,000 of debt?", asks Mark Sands of RSM Tenon. "You're faced with that barrier of hundreds of pounds before you can opt for bankruptcy to resolve your difficulties."

"It's a very steep rise," adds Una Farrell from the Consumer Credit Counselling Service.

"We already have to do a lot of work helping our clients to get the money together to pay the fees."

But Graham Horne says the Insolvency Service is obliged by parliament to break even, a task which has become increasingly difficult.

"It has always been our policy that if bankrupts can pay something towards their debts then they should," explains.

"And we have to strike a balance between giving bankrupts debt relief and a fresh start, and the need to provide some return to creditors."