Council Tax is now the biggest source of debt problems

Council Tax has overtaken credit cards as the most common source of debt problems - as 13% of people now have Council Tax debts, and The Citizens Advice Bureaux have warned that the number of people in arrears is up 14% since last September.

The figures come from commercial debt firm The Debt Advisory Centre. It also found that just over half of those with Council Tax debts owe up to two months' worth of payments, while one in 20 owe at least three months' worth.

Why?

When researchers asked people why they had fallen behind with payments, one in six people said they were spending so much on paying back unsecured debt - such as a credit card bill - that they had nothing left for Council Tax.

However, the overwhelming majority said there simply wasn't enough money to go around. More than a third said they needed the money to cover their rent or mortgage instead, while a fifth said they had to pay utility bills and 14% needed the money to buy food.

The situation has been made even worse by councils cutting back on the discounts they offer to vulnerable groups, and the relief they offer to low-income residents. There are also those who have faced large cuts in their benefits - who are only going to see their situation deteriorate after more cuts in April.

Meanwhile, Council Tax hikes are on the way around the country, which could push many people over the edge financially - and force them into debt.

Melanie Taylor, a debt expert at Debt Advisory Centre, said that before the cuts to benefits, the company mainly received calls from people who had either taken on too much debt, or who had borrowed and then suffered from a change in their circumstances that left them unable to pay the bills.

"Fast-forward to today", she says: "and things look quite different. While we still help lots of people who are having difficulty repaying credit, we have seen a rise in the number of who are struggling to pay their household bills, and in particular, their council tax."

What can you do?

If you are having difficulties paying your Council Tax, it's important to do something sooner rather than later. If you leave it up to the council to contact you, they can demand you pay all your debts in seven days, so it's important to contact your council as soon as possible and get in first. Talk to them about whether you are entitled to a reduction in your tax - based on your circumstances - and agree a plan of regular payments to catch up.

If you have no idea how you'll pay anything - let alone catch up - then it's time to talk to a debt charity like Stepchange or the Citizens Advice Bureaux. They have experts who can help you claim more help from the government or the council. They also have debt experts, who can talk you though your options.

If things have already gone further than this - and you are facing further action such as a liability order from the courts for non-payment - don't avoid the letter. If a liability order is granted against you, your council could recover what you owe from your wages or benefits. Again Citizens Advice or Stepchange will be able to help you protect yourself.

It's not going to be straightforward, and the debts won't just disappear. But by the time you have got to this stage you have already had more than your fair share of financial damage and distress, and debt charities will be able to stop you facing any more of it on your own.