Claimant Declared Bankrupt Or Sequestrated (Info)

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In England, Wales and Northern Ireland when a person cannot pay their debts they may be made bankrupt. In Scotland the same procedure is known as sequestration.

Note: The term bankruptcy will be used from this point onwards, but will also refer to sequestration for claimants who live in Scotland

A claimant may notify you that they have been declared bankrupt or you may receive correspondence about this from the Official Receiver or an Insolvency Practioner (from England, Wales or Northern Ireland) or an Accountant in Bankruptcy (from Scotland)

In all cases any tax credits overpayment will continue to be recovered until the claimant has been discharged from bankruptcy. The claimant will then need to provide a copy of the discharge notice before we can remit the outstanding balance of the overpayment.

Note: A bankruptcy order normally lasts for 1 year and a sequestration order for 3 years If the claimant is a member of a two claimant household then if only one member has been declared bankrupt, the tax credits overpayment will continue to be recovered from the other claimant. This is because both members of the household are jointly and severally liable for the overpayment

If a claimant notifies you that they have been made bankrupt but they also dispute or require an explanation of the overpayment, you must deal with the dispute or explanation first and then return to this guidance

If there has been a household breakdown on the award or no continuing entitlement, then Debt Management and Banking (DMB) will have been made aware of any claimant(s) that have been made bankrupt and will be in direct contact with them.

You may receive other correspondence in connection with a claimant’s bankruptcy from various bodies, for example; County Courts, Liquidators. Unless the correspondence you receive is specifically notifying you that a claimant has been made bankrupt or has been issued with a discharge notice, you will not need to take any further action on the correspondence

If a claimant states that the reduction in their tax credits payments is causing them hardship, follow the guidance in Manually Adjusting Payments To Avoid Hardship – TCO Only - For Cases Automatically Restricted After 29/06/07