John
I've been told that the only debts not included in bankruptcy are those which legislation specifically excludes (such as student loans); and that tax credit overpayments are not among the debts excluded. If this is correct then the overpayment could be wiped out by bankruptcy. However, there is a question mark over whether IR could claw it back by deduction from ongoing entitlement. DWP can definitely do this in respect of their benefits (and the Insolvency Service booklet on bankruptcy says so) and it seems logical that the same could be done for tax credits. If so, the ability to wipe the debt through bankruptcy is only likely to benefit someone who doesn't have an ongoing claim. Even then, there could I suppose be an issue as to whether IR could reclaim it by deduction if a new TC claim was made after discharge from bankruptcy. Logically they shouldn't be able to because the debt should have been written off by then and there is arguably an analogy with income tax written off in bankruptcy, which is not reclaimed from later earnings. However, knowing the IR I wouldn't bank on it!
It would be very helpful if you could post whatever you get from IR on this.
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