Cambridge City Council denies pushing people into bankruptcy
Cambridge City Council has hit out at accusations it is “pushing people into bankruptcy” and making it harder for people struggling with debt.
The council has come under fire, with accusations it is discouraging people from entering into Individual Voluntary Arrangements (IVAs) which could help them avoid falling into bankruptcy.
According to Citizens’ Advice, IVAs are a “formal debt solution to pay back debts over a period of time”.
The city council, however, says many IVAs fail, and can often be “counterproductive” for people in need of financial help.
Personal insolvency practice, Creditfix, says Cambridge City Council is one of 55 local authorities in England and Wales that “rejects IVAs”.
Taylor Flynn, head of marketing at Creditfix, said IVAs can be a good solution, and taking away the option for one could “push people towards bankruptcy”.
Mr Flynn said: “At a time when local authorities are increasingly cash-strapped, it seems absurd that Cambridge City Council would not consider IVAs as a repayment option.
“Of course, creditors, councils or otherwise, seek to claim back what is owed – but the cost of taking someone to court, employing bailiffs and potentially re-housing families made homeless through bankruptcy is enormous.
“More than anything, it sends out the wrong message to people who are taking responsibility for their money problems and turning their lives around, rather than burying their heads in the sand.”
The council, however, has hit out at the claims they are pushing towards bankruptcy, saying they always act responsibly to make sure debtors are aware of the implications.
Alison Cole, Head of Revenues and Benefits at Cambridge City Council, said the council does not have a “blanket policy” to reject IVA proposals, but will encourage people to carefully consider the implications before entering into them.
She said IVA proposals are voted on by each creditor and if enough creditors vote for the proposal, the proposal will be accepted. She said many IVAs proposed repayment of “only a fraction” of the debt, which would have an impact on the council. She also said a high proportion of IVAs fail within five years.
She said: “We take a very responsible approach and try to ensure that all options are considered and that potentially vulnerable debtors are fully aware of the long-term financial commitment (both to creditors and Insolvency Practitioners), before they enter into legally binding IVAs.”
Councillor Richard Robertson, executive councillor for finance and resources, said IVAs could be “counterproductive. He said that people should always find out about the implications of IVAs before entering into them. He said anyone struggling with debt should contact the city council first.
Cllr Robertson said: “We always welcome engagement with our council tax debtors and point out to them that going down an IVA route can be counterproductive.
“Set up fees can be very expensive with debtors having to pay the insolvency practitioner who arranges the IVA, before any money is paid to the creditors. We would encourage people to find out how much an IVA will cost before asking an insolvency practitioner to act for them.
“We would like to reassure people that there is plenty of support available in Cambridge for anyone who has difficulty managing their council tax payments. The Citizens Advice Bureau can provide advice on debt and there is a lot of information about debt advice on our website, but we would encourage anyone struggling with their council tax payments to contact the council in the first instance”.
