Tax credits debt

Clouds88

Can anyone advise please, before I went bankrupt I wrote to tax credits for the final and full amount I personally owe and they wrote back to me and my husband and said we both owe ‘x’ amount each and divided it between us. So I went BR first and that debt is wiped no problem. My husband went for a DRO as his amount was lower and put the amount that they said on the letter.

Fast forward to now and they are chasing him for the other £3,000 that was owed by me saying as I went BR they can now chase him for the other part as it wasn’t included in his debt relief order, only his half was that they wrote to him by.

Can they do this? I feel they are such bullies, the total amount has be written off in my eyes through my BR and his DRO and had it been the other way round then it would have been okay as my BR would include any amount. If so it would have been worth my husband going BR instead of DRO but no point in doing this for £3,000 straight after a DRO surely?. Argggh.

Minkym00

In bankruptcy all pre-BR debts are written off (except fraud etc etc) whether you have included them or not, so doesn't a DRO do the same? Would including the £3k have put his debt over the £20k? If not, this is what you need to look into.

debt_doctor

Hi,

There are significant differences between bankruptcy and DRO's.

In bankruptcy (as just said) all of your debt is included no matter what quantity you include on the forms or even if you omit the debt all together.

In a DRO, Only the amount that has been quantified prior to the DRO application will be included and it must be listed appropriately.

The problem you have is that HMRC allow a concession scheme for ex partners being allowed to be split their debt 50 - 50 as a basis for repaying the debt.

However, this flies in the face of the normal rules on joint debt whereby joint and several liability means both parties owe 100% of the debt.

It seems to me that your partner has included 50% of the debt derived from a figure that is provided as a concession 'deal' on the basis the debt is repaid. The correct figure for a DRO would have been 100%.

Did you request the figure for a specific purpose? Was it provided for 'DRO purposes'?

I think you are going to have a real problem here, it's a tricky grey area, your only potential route will be by the formal complaint route, perhaps on the basis of their potential unfairness.

DD

There is also the potential of the full debt taking the applicant over the £20k debt threshold.

Clouds88

It would not take him over the £20,000 , it’ll take him to £19890 lol. Because I asked for the full amount from HMRC due to going bankrupt they sent us both letters so I stupidly thought that would be that, he used the letter for proof of the debt he owes to them as part of the process. Is it possible to get the DRO stopped now then it started in January and go BR instead? He’s got mental health problems and no income so no chance of an IPA well just have to find £680 if that’s the best case?

debt_doctor

Hmm...

There is a facility in DROs for intermediaries to increase the level of debt that already exists within the application - they can't add a new debt (a creditor that didn't form part of the original application) but can increase an existing one.

You should contact the intermediary who processed the application to ask if they will contact the DRO Unit to amend upwards the HMRC debt.

Come back on here and let us know how that goes.

The only way the DRO could stop is if he no longer met the criteria. Could go BR immediately after 1 year though.

DD

Clouds88

Ok that’s interesting I didn’t know they could increase the amount I’ll let him know and tell him to do that. It would seem a waste of a year to have to go through a DRO and then a year BR so fingers crossed we can sort it. I’ll report back what they say.

Many thanks for your help.

debt_doctor

This is from the latest guidance for DRO Intermediaries on later amendments to balances......

The Official Receiver has discretion to amend the amount of a debt which has been wrongly stated in the application provided the amended total does not exceed £20,000 (leading to the revocation of the order). Every effort must be made to provide accurate information in the application but a qualifying debt may be amended in amount where the error is typographical or adequate explanation is given for using an estimated figure.

DD

Clouds88

Hey guys just wanted to update to say that the insolvency unit dealing with my husbands DRO were amazing. Within a day of emailing them they have amended the amount of the tax credit overpayment and changed the name to DWP like they wanted! A new amended DRO is coming via the post.

This is such brilliant news as we now owe them
Nothing and once we’ve sent them a copy they will have to stop deducting our UC award!

Quick question, will they refund the payments they have taken since January when he was declared insolvent or will they say because it was only amended now, they will just stop taking further payments?

debt_doctor

Hi,

Good news!

My thoughts are that the debt was a qualifying debt from day one of the DRO, just incorrectly named and wrong balance. So on that basis I believe the DWP should refund amounts paid to them since January.

DD