Back-dated benefits award after BR

NINANinja

Hi All
Happylympics to everyone.
I'm undischarged & I'm due for some backdated benefits, which will be paid as a lump sum. Some of it relates to before I went BR.
Will I be able to keep the money, or will the OR snaffle it? My only income is benefits at the mo.
Ta
NN

longtermplanner

It will go to the OR I'm afraid

TheGardener

Hi - I don't think the OR can take benefits at all - only earned income. Best speak to your OR and ask.

debt_doctor

Hi,


As it appears that you don't have any earned income to mix it with for a potential IPA - then the money is yours to keep.


DD

longtermplanner

Any benefits arelating to the period after going bankrupt cannot be claimed by the OR if the only income is from benefits.

But does this also apply to any "windfall" from backdating of benefits from before bankruptcy? In this case if the money had been in the bankrupt's bank account on the day of bankruptcy, it would have been taken by the OR, regardless of the fact it derived from the payment of benefits surely?

debt_doctor

longtermplanner wrote: »

Any benefits arelating to the period after going bankrupt cannot be claimed by the OR if the only income is from benefits.

But does this also apply to any "windfall" from backdating of benefits from before bankruptcy? In this case if the money had been in the bankrupt's bank account on the day of bankruptcy, it would have been taken by the OR, regardless of the fact it derived from the payment of benefits surely?

Hello LTP, I can't fault your logic, as in the case you described, that money would have simply been 'Cash at Bank' - and taken accordingly, I agree.


We tend to see this backdate of benefits issue quite often, both in BR and DRO's. Many of these were arrears due prior to insolvency, and (so far) have not caused an issue for the insolvent, unless an IPA is a possibility.


DD

debt_doctor

This is the closest I can find, from the Technical Manual. It specifically says 'tax credits' but all benefits are treated the same as each other in my experience..........


30.113 Tax credits
Where a bankrupt receives arrears of tax credits for a period prior to or post the date of the bankruptcy order, the tax credits are only available to the trustee once they are paid to the bankrupt and therefore notwithstanding the fact that the payments may relate to a period prior to the bankruptcy order the funds do not automatically vest in the trustee. The tax credits should be treated as part of the bankrupt’s income and be included in any calculation for an IPA/IPO. Any lump sum received can also be claimed through an IPA/IPO when received by the bankrupt. It is possible to claim the lump sum as a ‘single payment’ IPA/IPO but consideration needs to be given to the reasonable domestic needs of the bankrupt and his family. This applies equally to Child Tax credits and, other tax credits, (see Chapter 31.7).


DD

TheGardener

longtermplanner wrote: »

But does this also apply to any "windfall" from backdating of benefits from before bankruptcy? In this case if the money had been in the bankrupt's bank account on the day of bankruptcy, it would have been taken by the OR, regardless of the fact it derived from the payment of benefits surely?

Given that living on benefits is extraordinarily tough and barely subsistence living - it may be that the BR was in part caused by the fact the OP was not getting all the benefits they should have? I wouldn't have thought any back paid benefits are likely to be big enough to warrant 'windfall' status - most (but not all) can only be back dated by about 3 months anyway.
If it was housing or council tax benefit but the outstanding rent/C Tax has fallen into the BR then is it possible the benefits will have to be paid back anyway?

longtermplanner

Thanks debt doctor - experience trumps logic

montymud

Helpful Perhaps? Though I don't really understand fully what it is saying, perhaps DebtDoctor can unpick it?

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.

woodformoretrees

The first para seems to rule out taking it if there's no additional earned income.
I wish the people that wrote all these rules made more use of bullet points. The words are all like spaghetti to me!