Important info re insolvency and benefit overpayments

debt_doctor

Hi All,

Please read below regarding the latest circular for the DWP / Local authorities on overpayments and insolvency..........

http://www.dwp.gov.uk/docs/u1-2012.pdf

Point 5 is the interesting one regarding refunds of amounts taken from debtors since April 2009.

DD

fermi

1. Urgent Bulletin U6/2011, which followed on from U4/2010, G12/2010, U5/2010 and U1/2011 advised that on 14 December 2011, the Supreme Court affirmed unanimously the decisions of the lower Courts in relation to the Secretary of State for Work and Pensions’ (SSWP) v Payne & Cooper.

2. The judgment means that the Department for Work and Pensions (DWP) cannot recover overpayments of benefit or Social Fund loans by deductions from benefit where that overpayment or loan has been included in a Debt Relief Order (DRO).

3. The Supreme Court judgment has, however, wider implications in that DWP must also cease making deductions from benefit to recover any overpayments and Social Fund loans that pre-date a Bankruptcy Order made in England and Wales.

4. By analogy, we take this judgment to apply also in respect of deductions made by local authorities to recover overpayments of housing benefit (HB) and excess council tax benefit (CTB).

5. It follows that any deductions from benefit that have already been taken to recover overpayments of HB, where those were included as relevant debts in a DRO, must be refunded to the claimant. This applies to all deductions that have taken place since DROs were introduced in April 2009.

6. However, as these would be arrears of benefit, any refund of deductions, can be set against any other overpayments that are still outstanding, as long as they are for the same benefit, eg a refund relating to recovery of an HB overpayment can be set against any other HB overpayments that are outstanding.

7. Where there is a Bankruptcy Order, deductions cannot be taken, or continue to be taken, in respect of any overpayments that pre-date the Order. This in contrast to the position for DROs where deductions cannot be taken only where the debt has been included in the DRO.

8. Once a DRO or Bankruptcy Order has been discharged, any outstanding overpayments subject to these Orders must be written off with the exception of those caused by fraud. Recovery of overpayments caused by fraud can recommence using any recovery methods once the DRO or Bankruptcy Order has been discharged.

9. The judgment only has application to England and Wales. We are considering the position where a person is subject to a form of insolvency which is unique to Scotland such as Sequestration and Protected Trust Deeds but legal advice is that deductions can continue in those cases for the time being on the basis of existing case law. Further guidance will be issued if necessary.

10. In order for the DWP to fully assess the impact of the Supreme Court judgment on the recovery of overpaid benefit, we would like LAs to provide us with the information in the table on the following page.

fermi

Thanks for alerting us to the updated bulletin DD.

For ease of reference, I've pasted the text of the 10 points into the above post.

fermi

I presume in point 6 that the "still outstanding" overpayments that can be set off against are ones that fall outside the DRO or bankruptcy? Either beacuse they were not scheduled in the DRO, or they occurred and/or were subject to formal demands for repaymant after the comencement of the bankruptcy/DRO?

debtinfo

fermi wrote: »

I presume in point 6 that the "still outstanding" overpayments that can be set off against are ones that fall outside the DRO or bankruptcy? Either beacuse they were not scheduled in the DRO, or they occurred and/or were subject to formal demands for repaymant after the comencement of the bankruptcy/DRO?

That would be my reading of it as well

debt_doctor

fermi wrote: »

I presume in point 6 that the "still outstanding" overpayments that can be set off against are ones that fall outside the DRO or bankruptcy? Either beacuse they were not scheduled in the DRO, or they occurred and/or were subject to formal demands for repaymant after the comencement of the bankruptcy/DRO?

Yes they are my thoughts too.


DD

fermi

Right. I've copied over a couple of posts on to the thread on the DRO/IVA board, and stickied that thread for now as it has immediate implications there.

Here I will add a link to this thread in the main BR info sticky at the very least, and will see if more is needed later.

If we could more or less keep discussion on implications re DRO's on one and BR on the other that would be a help.

WantToBeFree

So that'll apply to the 9p my HB has over paid me, so they informed me today, they are taking action to recover this from my next payment :rotfl::rotfl:

debt_doctor

I'm wondering what the implications will be for a refund when the debtor is currently bankrupt?

How will the IS look at such a payment?

Exempt?
After aquired property?
added to income for the purposes of an IPA?

We debt advisers need guidance on that one........ Dear SSU......!!

DD

fermi

I would assume it would be treated in the way that arrears of benefits normally are?

i.e. cannot be claimed as an asset, but can effect an existing or new IPA?

debtinfo

Like this i presume

Section (c) Arrears of benefits received post bankruptcy

31.7.44 Claiming arrears of benefits received post bankruptcy

where bankrupt also has non-benefit income (IPA/IPO)
Where the bankrupt receives a payment of benefit arrears post bankruptcy (and is in receipt of other (earned) income), the official receiver can include the benefit arrears payment as a source of income to be included in an income payments calculation. If, by including the benefit income the bankrupt has sufficient surplus income (from non-benefit income), from which to make an IPA contribution, an IPA can be agreed.
It is suggested when calculating an IPA to include arrears of benefit income, the amount of the arrears is divided by 12 months (treating it as an “income boost” over the period of a year) and the corresponding monthly amount included in the calculation over a 12 month period.
(a) New IPA agreed
Where a new IPA is being agreed (including the benefit income) as the bankrupt did not previously have sufficient surplus income from which to make a contribution, the IPA should be paid at the assessed rate for 12 months, and then at a reduced or nil rate (based on an assessment of the bankrupt’s income without the arrears included) for the months remaining under the IPA (i.e. 24 months). The IPA contribution must be equivalent to or less than the income derived from non-benefit sources.
(b) Existing IPA to be varied
Where there is an existing agreement already in force this can be varied to include the benefit arrears and vary the agreement to include a temporary 12 month increase in payments. The payment amount can then revert to the previously agreed monthly payment amount for the balance of the term of the IPA agreement (to the end of the maximum possible term of 36 months). In the event that the bankrupt’s income changes again the IPA can be further reviewed.
If an IPA cannot be agreed with the bankrupt, then the official receiver can consider applying to court for an IPO to recover increased surplus income available as a result of the payment of the benefit arrears.