Bailiffs were called to collect Council Tax arrears from almost 600,000 people;
Councils filed for bankruptcy for more than 1700 people to collect council tax arrears.
The Liberal Democrats are calling for all public bodies, including local authorities and Government departments, to follow a code of conduct to ensure that families are not bankrupted unnecessarily during the recession.
Liberal Democrat Shadow Local Government Secretary, Julia Goldsworthy said:
"This survey shows the devastating effect that failing to pay council tax can have on families, especially those already struggling to cope with mortgage repayments and rising bills.
"Just as lenders are being asked to reduce repossessions, public bodies should do everything they can to ensure that bankruptcy is only ever a last resort.
"This is not a licence to avoid paying bills, it is about ensuring that court appearances and bankruptcy are avoided where possible.
"It is high time the unfair council tax was scrapped and replaced with a fair tax based on the ability to pay."
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