Is your tenancy actually with the Council? Or with a housing association who has taken over council stock?
Whatever If you are, as you say, up to date with the rent then there should be no grounds for seeking possession though they may seek to recover the o/p from your benefits and if your debt is part of the IVA then they need to be fully aware of that.
Most councils and housing associations have benefits and financial advisors nowadays. I'd have a word with them to get it all clear.
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