Client has about £10K IS & £8K HB recoverable overpayments arising from period when he & partner kept splitting up & getting together again. IS & HB were claimed throughout, but should not have been for periods they were together, as earnings too high. They are now together again & not entitled IS or HB. They were interviewed - probably under caution but vague about exactly what happened. They believe all relevant facts were given. So far as I can tell at present (trying to get more info) they did not have a penalty imposed, & definitely no prosecution.

Client considering bankruptcy. This would (as the law stands at present) wipe out the overpayments. However, there is some concern as to whether DWP &/or LA could then revisit the cause of overpayment & initiate prosecution. If fraud then proved, the bankruptcy would not wipe out the debts (& there would be other adverse consequences).

In other words, once DWP/LA have made a decision on a case, can they re-open it in the absence of any additional information? Can anyone advise on this please?

I cannot think of a reason why either ourselves or the DWP would re-open a case once we have made a final decision not to prosecute. the only thing I can possibly see is if something came to light in future, or they committeed more benefit fraud offences, but even then struggling to think why they would look at it again.
To be honest, there is just so much out there that I am sure the DWP investigators are just happy that that one is now closed and they can move on to the next one.

Thank you for that. I now have more info. They were both (individually) interviewed under caution. The IS was in the wife's name & she has a repayment demand with no penalty. The HB/CTB was in the husband's name. He was later seen again by the local authority & signed an Admin. Penalty Agreement for a 30% penalty. This states:

"It has been explained to me that the local authority believes it has grounds for instigating legal proceeding against me in respect of an offence relating to an overpayment of £XXX.

I agree to pay an admin. penalty of £XX this being 30% of the overpaid benefit. This penalty is offered to me under section 115A of the SSAA1992 as amended.

I understand and accept that by signing this agreement to pay a penalty, the Authority undertakes not to refer the matter of the overpayment for prosecution against me in relation to the £XXX benefit overpaid to me."

If he becomes bankrupt he will not be paying the penalty which - in the second para. - he agrees to pay. Would this be likely to result in the LA prosecuting because he has breached the agreement? If the third para. is read in isolation it would seem not because all he is committed to there is signing (which he has done) in return for LA agreeing not to prosecute. However, can it be read that way - or should the two paras. be read together?

Any comments, help or advice would be appreciated.

As far as I was aware Adpens are not seen as debts and therefore would not be included as part of a bankrupcy 'debt'. They are fines. I also thought that overpaid benefit was the same so slightly confused by your initial question, however if i'm wrong... you learn summat new everyday!

Provided the overpaid benefit has definitely been decided by DWP &/or LA and the amount is fixed and the possibility of appeal has passed before the date of the bankruptcy order then it is a bankruptcy debt. This has always been so (I believe) if the bankrupt was no longer in receipt of benefit; a recent Court case decided it also applies where benefit is continuing to be paid (previously, recovery was effected by deduction from ongoing benefit after discharge from bankruptcy - this has now been stopped). However, DWP are thought to be appealing this decision.

I had not thought of the possibility that Adpens might be fines. As you say, you learn something everyday! Is there any legislative reference you can give me to confirm this please?

If you have any comments on the questions in my last post I would be very grateful.

PS If the Adpen is a fine & not a bankruptcy debt, I don't see that this would stop the overpayment itself being a bankruptcy debt.

Hmmm, tough one this. If he has agreed to repay an ADPEN and then does not, then yes, normally, he would be prosecuted. However, if he cannot pay the ADPEN because of bankruptcy or whatever, then the LA should look at the individual reasoning for not paying it. I dont think I can really give any more specific advice as it would be up to each LA's own prosecution policy as to what action they then took.

Thanks for that. After I last posted I found some legislation. S15 SSA (Fraud) Act 1997, which inserted S115A into SSAA 1992. Sub Section (2) refers to a written notice "stating that he may be invited to agree to pay a penalty..... no such proceedings will be instituted against him". Sub (4) says that if the person "agrees in the specified manner to pay the penalty.........(b) no proceedings will be instituted against him for an offence (under this Act or any other enactment) relating to the overpayment".

The "specified manner" seems to be SI 1997/2813, which just states what the notice is to contain.

The bits I’ve quoted seem to me to mean that by agreeing to pay the penalty, whether or not it is actually paid, he becomes immune from prosecution in relation to the overpayment. But it does not give any immunity in relation to the penalty if that is not paid. You say non-payment would normally result in prosecution – presumably only in relation to the penalty? Does that mean that somewhere in the legislation it is specified that the penalty is a criminal sanction so that non-payment of it can result in prosecution? Otherwise it would seem to be a civil matter with recourse only to the County Court.


If I’ve got the above right, the penalty is a fine of a kind which would not be written off in bankruptcy. If it is, then the bankrupt would have to go on paying it, but not the overpayment which gave rise to it. For my client, this seems to be the best solution - he pays the penalty but the overpayment gets written off in the bankruptcy & he is immune from prosecution. Am I being too optimistic?

Any views or comments gratefully received.

This is from a very recent circular - have not read it fully but hope it explains things from the op/bankruptcy side of things, of which I confess to knowing nothing about !



Overpayment recovery when bankruptcy has been discharged
Introduction
52 The High Court of Justice recently heard a Judicial Review case, John Balding v Secretary of State for Work and Pensions (CO/7636/2006), challenging the Department’s right to recover benefit overpayments from customers declared bankrupt, once the bankruptcy is discharged.
53 The case was about the relationship between section 71 of the Social Security Administration Act and Insolvency legislation. The High Court considered whether liability to repay a recoverable overpayment ceases on discharge from bankruptcy under section 281 of the Insolvency Act. The court decided that only those debts specifically listed as exempt under Insolvency legislation are excluded from the effect of discharge from bankruptcy.
9
54 Social Security overpayments, including HB and CTB, are not listed as an exempt category. For LAs this means that only overpayments that are
• due to Fraud, or
• that arose and/or were decided after the date of bankruptcy
are exempt from the effect of discharge from bankruptcy and remain recoverable after discharge.
55 The Department has been granted leave to appeal against this decision.

Phew, I was just imagining all of my benefit fraudsters declaring bankrupcy and having their OPs wiped off. Logically this would make no sense, someone come commit £40Ks worth of benefit fraud, wait for appeal periods to expire and then declare bankrupcy!

No man should profit from his crimes

I agree with the last sentence. However, what happens in any particular set of circumstances depends on how the relevant law applies to those circumstances, & it is this I have been trying to clarify. As I think these posts show, it is not necessarily simple and straightforward, and the answers have helped me to advise the client on the possible implications of his various options.

Thank you for your help.