BR & tax credits overpayment

Tryingsohardtofloat

Afternoon all,

Hope everyone is OK. I am now, after nearly having a cardiac arrest when I had a letter through this afternoon about tax credit overpayment. I owe them £350 which they want back.

I've just phoned them & made an arrangement to pay, but could I just check it please.

I declared BR in Feb 2013 so am undischarged at the moment. The tax credit overpayment occurred last November, so 2012, before I declared BR. Basically I stopped being a single parent & moved in with my partner, so I stopped my single parent claim on that day & started a joint claim on that day also. Tax credits are now saying a payment was made to me on that day I phoned, which is why the overpayment is there.

Fair enough, like I say I've just phoned them & made a DD arrangement. Could I just check please that this is OK (I'm wondering now if the overpayment should be included in my BR debt as it was incurred before I declared?)

fermi

They are covered by the BR and you should not be paying them.

http://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch37-48/chapter40/part6/part6.htm#40.102

40.102 Overpayment of state benefits (amended August 2013)

Overpayment of state benefit, such as housing benefits, jobseekers allowance or tax credits may be made as a result of mistakes, change of circumstances or fraud.

It has been held that a debt in respect of an overpayment of benefits made prior to the date of the bankruptcy order would be a contingent liability (see Part 7) provable in the bankruptcy, whether the recovery decision was made before or after the bankruptcy order date URL="http://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch37-48/chapter40/part6/Notes/Notes.htm#7"][SIZE=3][COLOR=#0000ff]Note 7[/COLOR][/SIZE][/URL.

Such a debt incurred through fraud would not however be released upon discharge (see paragraph 40.12A).

It is considered that overpayments which are made after the date of the bankruptcy order are a post bankruptcy liability, for which the bankrupt would be liable to repay, even though they arose following an error (the decision to overpay) which occurred before the order.

40.102A Summary of position re overpayments of benefits (amended August 2013)

The following table provides a quick reference guide for dealing with overpayments of state benefits in relation to the making of the bankruptcy order (“BO”):




40.102B Overpayment of state benefits – brief legislative overview (amended August 2013)

There has been significant case law regarding the extent to which benefit overpayments can be recovered by the relevant benefit authorities following the making of a bankruptcy order.

In the case of R. (on the application of Steele) v Birmingham City Council URL="http://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch37-48/chapter40/part6/Notes/Notes.htm#12"]Note 12[/URL which was subject to an appeal by the Secretary of State URL="http://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch37-48/chapter40/part6/Notes/Notes.htm#13"]Note 13[/URL it was concluded that certain overpayments, are not contingent liabilities for the purposes of the Insolvency Act and Mr Steele was under no obligation or liability to repay the overpaid benefit until the Secretary of State had made his/her determination to recover the overpayment.

This decision has however been overruled by the Supreme Court and such debts are now considered to be provable debts (see paragraph 40.102).

The Department for Work and Pensions (DWP) have no rights to recover monies in respect of a provable debt. Bankrupts who have repaid, or are repaying, a debt which would now be provable as a result of the over-ruling of the Steele case may have a claim against the DWP for the recovery of those monies. This is a matter between the bankrupt and the DWP. The official receiver has no claim on any monies repaid to the debtor.

Tryingsohardtofloat

Thanks fermi, you are awesome.

debt_doctor

Excellent Fermi - and I had no idea - wonder when Citizens Advice will alert their advice staff to this one.............................

Thank you.

DD

fermi

Neither did I! Was expecting to see the old guidance when I went to check. :rotfl:

Loopy1

You can bet your life that Tax credits are trying to make out it was whilst you were in a joint claim and therefore not covered in BR.

roxy7699

Would the tax credits have to be named on the bankruptcy or notified at the time to be included?

fermi

In theory, no. It would not matter and they should be covered.

pizzarepairman

Hi Fermi,

apologies for hijacking this thread.

I was claiming Tax Credits before I declared myself bankrupt in 2010. Whilst newly bankrupt, HMRC got in touch to say there was an overpayment to me. I told them I was now bankrupt and gave them my details. About a year later they got back in touch to say I was still liable for the overpayment and had to work out a payment plan. So I have been paying them £50 per month for over a year.

In light of the above, do I still have to repay them?

Any help appreciated, and sorry again for jumping in.

debt_doctor

pizzarepairman wrote: »

Hi Fermi,

apologies for hijacking this thread.

I was claiming Tax Credits before I declared myself bankrupt in 2010. Whilst newly bankrupt, HMRC got in touch to say there was an overpayment to me. I told them I was now bankrupt and gave them my details. About a year later they got back in touch to say I was still liable for the overpayment and had to work out a payment plan. So I have been paying them £50 per month for over a year.

In light of the above, do I still have to repay them?

Any help appreciated, and sorry again for jumping in.

Hi, If the amount was overpaid to you BEFORE your bankruptcy date, then they are not entitled to any more payments - and owe you the money you have already paid. You will almost certainly have to make a formal complaint to get your money back, but it's your money so you should - and the OR has no claim on the money you may receive.

DD

pizzarepairman

Hi DD, thank you for the quick reply.

Am I best to call them about this in the first instance? And is there some thing I should refer them to to say why I am raising the complaint (e.g. legislation or case law?)