Mortgage overpayment - UC - deprivation of capital

kaMelo

peteuk said:

kaMelo said:

There is no nuance, under UC paying down (or clearing completely) a legitimate debt is never considered deprivation of capital.

The only debate to be had is whether a debt is a legitimate, documented debt. A mortgage clearly is, paying back a friend or family member could be more problematic.

But surly theres the optics of youve sat on over £16K for two years, but only now your paying off your mortgage. I know its personal choice and previously you could argue the interest rate was so good that £16K in a high interest account was potentially better than paying of a low interest (fixed) mortgage.  But still even though paying off debt is not DoC, something like this is likely to attract the question.

 What actually matters though is the legislation and UC legislation is very specific, paying off debt is never DoC. 

Obviously the debt has to be a genuine debt, not just some cooked up debt to a family member. Hence why I would always state 'documented debt' as without the paper trail there could be a debate as to whether the debt exists.

I agree about the optics but it's no worse than someone with a million pound property portfolio also claiming tax credits. Neither look great but the rules allow it to happen.

Spoonie_Turtle

I can't find any reference, implicit or explicit, to 'optics' in the law, or any grey area here, although as usual always happy to be corrected:

"(2) A person is not to be treated as depriving themselves of capital if the person disposes of it for the purposes of—

(a)reducing or paying a debt owed by the person"

https://www.legislation.gov.uk/uksi/2013/376/regulation/50

8dayweek

Spoonie_Turtle said:

I can't find any reference, implicit or explicit, to 'optics' in the law, or any grey area here, although as usual always happy to be corrected:

"(2) A person is not to be treated as depriving themselves of capital if the person disposes of it for the purposes of—

(a)reducing or paying a debt owed by the person"

https://www.legislation.gov.uk/uksi/2013/376/regulation/50

You’re right @Spoonie_Turtle. I also fairly certain there’s not any different Legislation for Move to UC cases (as in, there’s Legislation for Transitional Protection / Managed Migration etc but on the whole that is something piggy backing over existing Legislation for the Managed Migration period rather than meaning the entirety of the claim forevermore falls under different Legislation).  

Hmmm… it’s interesting that they’ve come to that conclusion. I’d be interested in what evidence the OP has supplied for them to come to DoC conclusion. 

Other than an error (perfectly plausible), the only scenario I could think of would be paying a lump sum off an interest only Mortgage which only services the interest rather than the outstanding Mortgage? It would be a rather niche argument still though, but could be said that it doesn’t pay off or reduce a debt they owe. 

xxxxxxxx

If the OP will please explain the full circumstances...

@ Turtle

Playing Devil's Advocate.

It would have to be challenged to Upper Tribunal but the legislation does not say 

50.

(2) Paragraph (1) does not apply if the person disposes it by paying off debt.  

No, it says:

(2) A person is not to be treated as depriving themselves of capital if the person disposes of it for the purposes of—

(a) reducing or paying a debt owed by the person; or

It is a fine play on the wording, but if this is what DWP has done and they stick to their guns...

The question for the Tribunal is was it "paid for the purpose of"... 'reducing the debt' or 'gaining entitlement to UC'? and if it was for the purpose of gaining entitlement to UC... does the fact that it was disposed of by reducing a debt mean that there was or was not a DoC ?

stu12345_2

not sure if this helps , I read a similar story before and the person had a lump sum and chucked that money into paying off a credit card.
it was seen as deprivation of capital as there was no demanding letter saying the full balance must be paid now, as the DWP said the contractual payment was simply the min monthly payment due in credit card debt  and the credit card had not demanded full payment of the full balance

obviously any debt advice website would say pay off debts if you have a lump sum, but these sites think you are working and not claiming any benefits.

but if you are claiming or hoping to claim and you start clearing debts that aren't due in full and you do pay them in full and it lets you get higher benefits or indeed the start of a benefit then the DWP can say it's deprivation of capital, as in the person I gave at the example and their story 

xxxxxxxx

stu12345_2 said:

not sure if this helps , I read a similar story before and the person had a lump sum and chucked that money into paying off a credit card.
it was seen as deprivation of capital 

Was this UC? The person should have appealed, esp if their purpose was to pay off the debt. Where did they get the lump sum?

I have heard of drawing down on pension specifically to pay off credit cards, and the work coach do not even ask for a decision to  be made.

stu12345_2

xxxxxxxx said:

stu12345_2 said:

not sure if this helps , I read a similar story before and the person had a lump sum and chucked that money into paying off a credit card.
it was seen as deprivation of capital 

Was this UC? The person should have appealed, esp if their purpose was to pay off the debt. Where did they get the lump sum?

I have heard of drawing down on pension specifically to pay off credit cards, and the work coach do not even ask for a decision to  be made.

think it was a pensioner claiming housing benefit , when they originally got housing benefit, then got an inheritance, went above savings limits, housing benefit thus stopped, then they spent their inheritance on clearing all their credit card debts, then reapplied for housing benefit and was told no, deprivation of capital as there was no demand from the creditors to make full payment and clear the credit card debts to zero  and thus have savings low enough to be eligible for housing benefit again

the DWP then worked out how long it would reasonably take to spend her inheritance on reasonable overheads and would only reinstate her housing benefit once it has been spent at a reasonable pace or something like that , it was from about 5 years ago the article I read

Yamor

xxxxxxxx said:

If the OP will please explain the full circumstances...

@ Turtle

Playing Devil's Advocate.

It would have to be challenged to Upper Tribunal but the legislation does not say 

50.

(2) Paragraph (1) does not apply if the person disposes it by paying off debt.  

No, it says:

(2) A person is not to be treated as depriving themselves of capital if the person disposes of it for the purposes of—

(a) reducing or paying a debt owed by the person; or

It is a fine play on the wording, but if this is what DWP has done and they stick to their guns...

The question for the Tribunal is was it "paid for the purpose of"... 'reducing the debt' or 'gaining entitlement to UC'? and if it was for the purpose of gaining entitlement to UC... does the fact that it was disposed of by reducing a debt mean that there was or was not a DoC ?

I don't think this is a possible interpretation. Remember, capital deprivation only ever applies where it is done for the purpose of securing entitlement to UC (or an increased amount of UC). As such, there would be no need for an exception for paying down a loan unless it was also done for the purpose of securing entitlement to UC.

The ADM at H1796 is also pretty clear about this.

kaMelo

stu12345_2 said:

xxxxxxxx said:

stu12345_2 said:

not sure if this helps , I read a similar story before and the person had a lump sum and chucked that money into paying off a credit card.
it was seen as deprivation of capital 

Was this UC? The person should have appealed, esp if their purpose was to pay off the debt. Where did they get the lump sum?

I have heard of drawing down on pension specifically to pay off credit cards, and the work coach do not even ask for a decision to  be made.

think it was a pensioner claiming housing benefit , when they originally got housing benefit, then got an inheritance, went above savings limits, housing benefit thus stopped, then they spent their inheritance on clearing all their credit card debts, then reapplied for housing benefit and was told no, deprivation of capital as there was no demand from the creditors to make full payment and clear the credit card debts to zero  and thus have savings low enough to be eligible for housing benefit again

the DWP then worked out how long it would reasonably take to spend her inheritance on reasonable overheads and would only reinstate her housing benefit once it has been spent at a reasonable pace or something like that , it was from about 5 years ago the article I read

While there is some logic behind the legacy benefit rules on repayment of debt, the actual outcomes of those rules almost seems perverse at times.

Thankfully UC treat repayment of debt in a completely different way.

jane_doe

I'm interested in this DoC in a slightly different situation. I bought my house jointly with my brother, him helping me with loan towards the deposit. Conveyancing solicitor recommended he went on the title and a deed was drawn up to specify that his deposit contribution was for an equivalent share of the equity, and that he wouldn't request his money back/force sale of the property for 5 years. All was fine, and 7 years later I'd saved up enough to repay him. So we had a solicitor draw up an variation to the trust stating that he was transferring his equity share in exchange for my cash.

All this was before I claimed UC so there was no capital issue at the time. The loan was documented legally by the trust deed that we had. Should that be sufficient to prove it was a genuine debt and not be considered DoC?