Repayment Arrangements with Debtors

Image: Francesco Ungaro/francesco_ungaro/Unsplash
Image: Francesco Ungaro/francesco_ungaro/Unsplash

Q: A Liability Order has been granted against a ratepayer. They now want to pay by instalments. What considerations do I need to have?

A: A sensible repayment arrangement, in line with an up-to-date statement of means, can be the most efficient and effective method of collecting an unpaid liability order.

However, it is important for the Council in all cases to appreciate the differences and potential consequences of, on the one hand what amounts to “forbearance” and on the other a formal settlement arrangement.

Where the intention is to grant mere forbearance, in other words a temporary arrangement to repay in order to avoid the consequences of enforcement, that should be clearly communicated to the ratepayer and the language used when repayments are not made should not make reference to arrears, breaches or termination. It should instead merely indicate that further forbearance will no longer be afforded and enforcement of the Liability Orders will resume.

In granting forbearance, this should be recorded in a letter or email to the ratepayer at the time. You may wish to consider some standard wording, for example;

Dear [ratepayer],

We are writing to you in connection with your liability for Council Tax/NNDR  for the period [specify] in respect of [property address], for which the Council holds (a) Liability Order(s) against you in the sum of £[insert sum].

Further to our [correspondence dated / meeting on / telephone call on], this [letter / email] is to confirm that the Council will not enforce the Liability Order(s) provided that you make payment of the instalments you have offered of £[insert sum] per [week / month], the first payment to be made by [date]. For the avoidance of doubt, you have not provided any additional consideration to the Council and as such the cessation of enforcement action is intended only as forbearance, granted by the Council to you.

Should the instalments not be made as you have offered, the Liability Orders which remain in place can be enforced by the Council.

If you have any queries in relation to the above, please do not hesitate to contact us.


Be aware however that if the decision is made to reach a formal agreement, perhaps in a formal settlement agreement, this may constitute compounding the debt. In other words creating a new agreement or obligation separate to the original liability order and which supersedes it.

This may arise where the Council receives consideration (such as additional security, the payment of legal costs or the compromise of legal proceedings) and the precise terms should be recorded in writing, even if that is a confirmatory letter or email as opposed to a more formal signed settlement agreement. If there is a breach of this kind of agreement, as distinct from forbearance, it is the terminated agreement which would be enforced usually by insolvency action.

Greenhalgh Kerr
Olympic House, Beecham Court,
Smithy Brook Rd,
Wigan WN3 6PR

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+44 (0)333 200 5200

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