Claimant Declared Bankrupt Or Sequestrated (AG)

• You have been contacted by a claimant who is disputing an overpayment, or requires an explanation of an overpayment, and they state that they have been made bankrupt or sequestrated, pass the claim to Customer Service and Support Group (CSSG)

Notes:

• You receive a referral from the Customer Support Unit (CSU), Disputed Overpayments Team (DOP) or CSSG, go to step 2
   
• You receive a reply to a TC880a-3 or TC880a-2, go to step 2
   
• You receive a reply from an S18 trained member of staff, stating their action is complete

• Go to function MAINTAIN DISPUTE and un-suspend recovery of the overpayment, then go to step 6

• A claimant or their personal acting body notify you they have been declared bankrupt, go to step 2
   
• You receive a letter or documentation from a claimant or their personal acting body advising that a claimant has been discharged from bankruptcy, go to step 2
   
• You receive any correspondence from anyone other than the claimant or their personal acting body regarding the claimant’s bankruptcy, for example, the Insolvency Practitioner, County Court or Insolvency Service, go to step 16

• Enter the claimant's NINO in the Key Entry Data screen
   
• Select the All checkbox
   
• Click on the [OK] button. You will be taken to the Select Award screen
   
• Click on the latest award version for the current year to highlight it
   
• Click on the [OK] button. You will be taken to the Award Summary screen
   
• Check if there is still entitlement to tax credits

Note: If there is more than one household within the current year, repeat this action for all households

• If the claim is

• Open and the award is ongoing, do you know the date the claimant was made bankrupt?

• Yes, go to step 3
   
• No, go to step 11

• Ceased, terminated or open with a nil entitlement

• Prepare and issue a free format letter to the claimant stating

‘Thank you for your letter of (insert date of letter from claimant). Your overpayment of tax credits is being dealt with by another department within HM Revenue & Customs. They will contact you or your insolvency practitioner directly, if they have not already done so’

Note: If you have received a reply to a TC880a-3, but since it was issued the affected claim is now ceased, terminated or open with a nil entitlement, also add the line below to the free format letter

‘We are sorry for any inconvenience we have caused by writing to you again’

Then

• Go to step 16

Notes:

1. If the award is still in payment, then the claimant has ongoing entitlement and any overpayment will be recovered by cross-year recovery
   
   
2. If the award is ceased or terminated, Debt Management and Banking (DMB) will be dealing with any overpayment recovery. There is no need to forward the correspondence to DMB
   
   
3. If the award is ceased or terminated, you must only issue the letter to the claimant who states they are bankrupt or sequestrated

• Click on the latest finalised award with an issue date to highlight it

Note: The finalised award notice may have been issued manually. Where this is the case you will need to check household notes for the issue date

• Make a note of the date in the Issue Date field

Notes:

1. The claimant will have been notified of the overpayment on their award notice, when their award for the year that has ended was finalised. The overpayment will usually be for the previous tax year. Any overpayment in the current tax credit year is only notional, as the award will not have been finalised yet, but due to this there may have been a reduction in the claimant’s tax credit payments. Bankruptcy does not affect this, therefore any in-year recovery will continue
   
2. Repeat this step for all years finalised, with an issue date before or after the date the claimant was declared bankrupt

• Is there more than one finalised award for a Tax Year?

• Yes, go to step 4
   
• No, go to step 6

• Yes, go to step 6

Note: A claim referred by CSU / DOP or CSSG will already have had the action completed in steps 4 and 5

• No, continue with the guidance below

• If there is more than one Final Actual Award Notice (Fin Act)

Or

A combination of Fin Act or Final Managed (Fin Man)

And

Final As Actual (Fin As Act) Notices have been issued in any of the previous award periods. The award has been re-finalised

• Follow the guidance in S18 - Written Confirmation To Work Re-Finalised Cases Not On The KAI List For Tax Years 2003-2004, 2004-2005, 2005-2006 And 2006-2007

If after following the guidance

• You can continue to work the claim because the re-finalisation was valid, go to step 6
   
• If you cannot continue to work the claim because the re-finalisation was not valid, make a note of the reason and go to step 5

Note: If after following the guidance S18 - Written Confirmation To Work Re-Finalised Cases Not On The KAI List For Tax Years 2003-2004, 2004-2005, 2005-2006 And 2006-2007 you decided the claim is ‘unworkable’, there are 3 reasons to consider

• ‘On the KAI List’
   
• ‘Possible KAI List case – re-finalised after 1SD’
   
• ‘Possible KAI List – re-finalised after 2SD’

• Go to Function MAINTAIN DISPUTE and suspend recovery of the overpayments for all years that were finalised before the date of bankruptcy. Follow the guidance in Register And Maintain A Disputed Overpayment Or Manual Suspension from steps 10 to 15
   
• Use Function MAINTAIN HOUSEHOLD NOTES and select the ‘Debt Recovery’ category to record the following. Make sure you tick the Retained checkbox after recording the note

‘ OD69 - Bankruptcy Case recovery of the overpayment for 200X – 200X (enter all tax years suspended) suspended awaiting further guidance Group XX Team XX’

Note:

You must follow the guidance in How To Correctly Complete Application And Household Noteswhen you record the note

And also

Follow the guidance in Maintain Household Notes

Then

• Pass the claim to your manager

Note: Your manager will refer the claim to an S18 trained member of staff

• Take no further action

• Before the issue date on the claimant’s tax credit award, go to step 9
   
• After the issue date on the claimant’s tax credit award and

• The claimant has a partner, go to step 7
   
• The claimant does not have a partner, has the claimant been discharged from bankruptcy?

• Yes, and you have a copy of the discharge notice, go to step 12
   
• Yes, but you do not have a copy of the discharge notice, go to step 11
   
• No, go to step 10

Note: Repeat this step for all tax years

• If only one of the claimants has been declared bankrupt, go to step 8
   
• If both have been declared bankrupt, have both claimants been discharged from bankruptcy?

• No, go to step 10
   
• Yes, and you have a copy of both discharge notices, go to step 12
   
• Yes, but you do not have a copy of both discharge notices, go to step 11

Notes:

1. If it is a joint claim and only one claimant has been declared bankrupt, then there is a solvent partner that the overpayment can continue to be recovered from
   
2. If both claimants have been declared bankrupt, there should be a bankruptcy or discharge notice for each claimant as they are only made in respect of the individual

Then

• Go to step 16

Then

• Go to step 16

Then

• Go to step 16

• If you have come here from steps 2 or 6 and are able to contact the claimant by telephone, ask them what date they became bankrupt and then go back to step 2
   
• If you have come here from step 7 and are able to contact the claimant by telephone, ask them to send you a copy of the discharge notice and then go to step 16
   
• If you have come here from steps 2 or 6, but you are unable to contact the claimant by telephone

• Send them form TC880a-2

Note: If you do not receive the bankruptcy or discharge notice after following the normal reminder cycle, go to step 16

• Set a clerical BF for 14 days in the future
   
• Use Function MAINTAIN HOUSEHOLD NOTES and select the ‘Debt Recovery’ category to record the following

‘ OD70 - Contacted claimant (insert name) advised they send us (*bankruptcy/*sequestration/*notice of discharge *delete as appropriate )’
 

Or

‘ OD71 - TC880a-2 sent to claimant (insert name) asking for (*bankruptcy order/*sequestration order/*notice of discharge *delete as appropriate)’

Notes:

You must follow the guidance in How To Correctly Complete Application And Household Notes when you record the note

And also

Follow the guidance in Maintain Household Notes

• Take no further action

• Enter the claimant's NINO in the Key Entry Data screen
   
• Select the All checkbox
   
• Click on the [OK] button. You will be taken to the Select Award screen
   
• Click on the latest award to highlight it
   
• Click on the [OK] button. You will be taken to the View Award Period Summary screen
   
• Click on the [Schedule] button. You will be taken to the View Direct Payment Schedule screen
   
• Check the discharge notice to confirm the date the bankruptcy was discharged. This will be 1 year or 3 years respectively from when the claimant was declared bankrupt
   
• Add together any amounts in the Amount Recovered column for all payments that have been issued on or after the date of the discharge notice

Notes:

1. Repeat for all tax years after the date of discharge
   
   
2. If both claimants have been declared bankrupt and they have been discharged on different dates, you must use the later date. For example, one claimant is discharged on 01/04/07 and the other is discharged on 30/06/07, you must add together amounts recovered on or after 30/06/07
   
   
3. Recovery is always carried out on the earliest outstanding overpayment on an award. When the earliest overpayment is fully recovered, the computer will start to recover on the next earliest award where there is an overpayment. To work out the amounts recovered in each award period you must check each award year in turn to see where the recovery has been made after the date of the discharge

Then

• Go to step 13

• Click on the award period that the finalised award notice you identified at step 3 was issued for to highlight it
   
• Click on the [OK] button. You will be taken to the View Award Period Summary screen
   
• Make a note of any amount shown in the Overpayment Outstanding field

Note: Repeat this action for all years finalised prior to the date of bankruptcy

• Calculate the total overpayment to be remitted by adding together

• All the amounts noted above from the awards finalised prior to the bankruptcy date, if any

And

• The amount recovered since the date of the discharge that you calculated at step 12

Note: If the claim is a complex case you must contact the European Economic Area Team TCO before remitting the overpayment. For complex cases the overpayment may be greater than the outstanding figure shown on the computer

Then

• Go to step 14

Note: If it is not possible to use Class 2 to make the remission because it requires the full amount of overpayment to be remitted, use Class 5B

Note: The amount recovered will have been posted back to the earliest award with an outstanding overpayment first. To remit the recovery you need to check which award the amount has been posted to

Note: If you have made a remission and you are working a claim for tax year 2003-2004, enter the following message

^^^^^2003-2004 Recalculation is required

• If you have made a remission and you are working a claim for tax year 2004-2005, enter the following message

^^^^^2004-2005 Recalculation is required

• If you have made a remission and you are working a claim for tax year 2005-2006, enter the following message

^^^^^2005-2006 Recalculation is required

Note: If you are working a claim for more than one tax year, for example 2003-2004 and 2004-2005, you must enter the above messages separately for each tax year
 

Then

• Go to step 15

Then

• Go to step 16

• Step 1 – ‘ OD73 – Letter received from (insert originator of the letter) with regard to declaration of bankruptcy. Unable to action as declaration must be received from the claimant or their personal acting body’
   
• Step 2 – ‘ OD61 - Claim ceased or terminated. Letter issued to(insert claimant 1 or claimant 2) as overpayment in direct recovery, bankruptcy correspondence sent to storage’
   
• Step 8 – ‘ OD62 - TC880b issued to claimant advising that as (insert claimant name) is not subject to a (insert bankruptcy or sequestration) order we will continue to recover the overpayment’
   
• Step 9 - ' OD63 - Bankruptcy / Sequestration order dated before our tax credit decision. TC880a issued advising recovery to continue'
   
• Step 10 – ‘ OD64 - TC880a-3 issued, advising (insert claimant 1 or claimant 2) to notify us when discharged from bankruptcy’
   
• Step 11 – ‘ OD65 - Claimant has not replied to TC880, recovery will continue’
   
• Step 11 - ‘ OD66 - Unable to contact claimant by telephone TC880a-2 issued requesting copy of discharge notice’
   
• Step 11 - ‘ OD67 - Spoke to claimant and requested copy of their discharge notice’
   
• Step 15 - ' OD68 - Overpayment amount remitted as Class (* 2 or * 5B *delete as applicable) of £XXX.XX for XX/XX (Repeat for each year you have remitted an overpayment on) due to bankruptcy or sequestration. Letter TC880c issued advising claimant(s)'

Notes:

You must follow the guidance in How To Correctly Complete Application And Household Notes when you record the note

And also

Follow the guidance in Maintain Household Notes

Then

• Go to step 17

• Bankruptcy notice

And

• Discharge notice to storage. Follow the guidance in Preparing And Sending Documents For Storage

Note: If you have original copies of the Bankruptcy notice and / or the Discharge notice, make copies and return the originals to the claimant