Manchester City Council criticised for using bankruptcy proceedings

Archived press release

Date Published: 07/10/09

There were “significant failings” in the way Manchester City Council used bankruptcy proceedings to recover council tax debt.

In his report, issued today (7 October 2009) Local Government Ombudsman, Jerry White, says: “I regard it as a fundamental flaw that the Council should have been using this method of collection without a written policy for Officers to refer to in individual cases. I consider it maladministration for an authority not to have such a policy … in such an important area of public administration.”

‘Mr Joseph’ (not his real name for legal reasons) complained about the actions of Manchester City Council in making him bankrupt for non-payment of council tax in February 2007. Mr Joseph contested that he did not owe the debt the Council was seeking to recover and nor was he made aware of the bankruptcy process.

While the Ombudsman has decided that the first of these matters is outside his jurisdiction to consider and the second cannot be substantiated on the facts, he has nonetheless found significant failings in the administrative actions taken by the Council in pursuing bankruptcy:

• it did not have any written procedure in place to consider whether bankruptcy was appropriate in this case;
• it failed to adequately consider the alternative of an attachment of earnings which could have been applied to Mrs Joseph’s wages; and
• it failed to give Mr Joseph sufficient warning of the potential consequence of its intentions to commence bankruptcy proceedings from January 2006 onwards.

The Ombudsman said: “… the consequences of bankruptcy can be devastating to the debtor in terms of both the loss of assets and the costs that can multiply the debt many times over. … I find that the Council’s actions in this case are insufficient to demonstrate that it properly took account of Mr Joseph’s circumstances, properly considered alternative courses of recovery, or gave adequate due warning before choosing the route of bankruptcy.”

The Ombudsman finds maladministration causing injustice and recommends that the Council should pay £1,000 compensation to Mr Joseph in recognition of the injustice caused by its failings in this case.

While he welcomes the procedural changes made so far by the Council with regard to recovery of its debts through bankruptcy, the Ombudsman also recommends some further changes to its current bankruptcy collection procedures.

Report reference: 07B10432