He ordered the authority to pay £1,000 compensation to the man in recognition of the "injustice".
The council said it acted within the law and was disappointed by the report.
The resident, known only as Mr Joseph for legal reasons, complained about the council making him bankrupt for non-payment of council tax in February 2007.
He claimed he did not owe the debt and was not made aware of the bankruptcy process.
The ombudsman decided that the question of the debt was outside his jurisdiction and the second could not be substantiated.
But Mr White found significant failings in the administrative actions taken by the council in pursuing bankruptcy.
He said it did not have any written procedure in place to consider whether bankruptcy was appropriate.
The council also failed to give Mr Joseph sufficient warning of the potential consequences of its intentions.
Mr White said: "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.
The report added: "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."
Manchester City Council has launched bankruptcy proceedings against 433 people since 2005, netting about £3m..."