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What to do when a customer is bankrupt 107-05070010

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For Debt Staff.

This document outlines the impact on Centrelink debts when a customer is declared bankrupt.

On this page:

Customer requires a callback

Advice and details of bankruptcy and debt

Determine period of debt and if refund is required

Write off debt, review process and discharge of bankruptcy

Customer requires a callback

Table 1

Expand table

Step

Action

1

Customer enquiry

If unable to resolve a customer's bankruptcy enquiry, refer the enquiry to the Bankruptcy Team:

  • use Fast Note - select Auto text, use Debt Recovery > Debt Recovery Referrals > Bankruptcy Team Referral DOC
  • include full supporting information. Add details of the customer's bankruptcy enquiry

Advice and details of bankruptcy and debt

Table 2: For staff in the Debt Administration and Bankruptcy Team.

Expand table

Step

Action

1

Action debt using script

Use the Debt Recovery script to action a debt.

If the script is unavailable, use this procedure.

2

Advice from customer

Can the customer give bankruptcy or Declaration of Intention (DOI) details?

3

Customer unable to provide bankruptcy or Declaration of Intention (DOI) details

Customers can obtain their bankruptcy details from:

  • the Australian Financial Security Authority (AFSA)
  • their Administrator/Trustee

Customers should list Services Australia as a creditor so the agency receives notification from the Administrator/Trustee.

The Resources page contains a link to the AFSA website contact page.

Recovery is to continue until the agency receives details of the bankruptcy.

See:

Procedure ends here.

4

Check the status of the debt on the Debt List (OPDL) screen

Status reason for write offs:

  • D-Pend Rcvr Actn with the reason Bankruptcy Temporary (BRT), or
  • F - Written Off with the reason Bankruptcy Discharged (BRD)

Is the customer's debt written off for Bankruptcy?

5

Debt written off bankruptcy

Discuss the reason for the call and answer any questions the customer may have.

To help with the discussion, refer to DOCs to explain reasons for determinations of BRT or BRD.

See:

If the DOCs are unclear and an explanation cannot be given to the customer:

  • create a DOC
  • detail what has been discussed, and
  • refer to the Debt Administration and Bankruptcy Team region (DR1)

Procedure ends here.

6

Record details of bankruptcy

Record the details on a DOC using Fast Note - select Auto text, use Debt Recovery > Debt Recovery Referrals > Bankruptcy Team Referral.

Details to include:

  • bankruptcy number
  • date of bankruptcy
  • name of Trustee/Administrator
  • amount the agency has listed in bankruptcy

If the agency is not listed as a creditor, ask the customer to contact AFSA or their Administrator/Trustee to include the agency. The Administrator/Trustee will update the agency.

Procedure ends here.

7

Check for Debtors Petition

Has Australian Financial Security Authority (AFSA) or the administrator provided a Debtors Petition (original or copy)?

8

Check bankruptcy details

Can the customer provide details of the bankruptcy?

9

Customer unable to provide bankruptcy details

Recovery must continue until the customer can provide these details:

  • bankruptcy number
  • date of bankruptcy
  • name of the Administrator/Trustee, and
  • report from AFSA or administrator

Advise the customer to contact AFSA or their Administrator/Trustee to request bankruptcy details. They can ask for the details to be sent to the agency.

See:


Determine period of debt and if refund is required

Table 3: For staff in the Debt Administration and Bankruptcy Team.

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Step

Action

1

Contact AFSA or administrator

Make a request by:

See the Resources page for a link to the AFSA website.

Proof of Debt forms should be authorised by APS4 Bankruptcy Debt Staff or above.

Confirm these details:

  • name
  • date of birth
  • bankruptcy number
  • date of bankruptcy, and
  • type of bankruptcy, that is, debtor's petition or sequestration order

Note: it is possible to search for bankruptcy details using EQUIFAX. This does not provide the Statement of Affairs. The Resources page contains a link to the EQUIFAX website.

2

Determine the period of each debt

Check the Modify/Access Debt (OPMA) screen for each Debt ID.

For specific information on family assistance debts, see Effect of bankruptcy on family assistance overpayments.

For debts covering the period:

  • before the date of bankruptcy, go to Step 3
  • after the date of bankruptcy, see Table 2 > Step 4
  • both before and after bankruptcy:
    • use Fast Note to refer the case to the relevant Debt team. See the Resources page in Debt ownership for referral details
    • ask for recalculation of 2 separate debts
    • procedure ends here until complete

3

Check if refund is payable

Is a refund of repayments payable to a bankrupt customer?

4

Dividend from bankrupt estate

According to the trustee, is there likely to be a dividend from the bankrupt estate?

5

Proof of Debt

Trustees can request Proof of Debt. They must complete and lodge the form provided to them.

This will list Services Australia as an unsecured creditor.

Create a DOC using Fast Note. Document that a dividend is expected for the specific Debt ID. Payments received from dividend payments will be credited to the debt.

Does the trustee require the agency to lodge a Proof of Debt form?

6

Reparation or judgement order

Special instructions exist for customers who have a reparation and/or judgement order in place. Take the following action to check if a reparation/judgement order is pending/in place:

  • debts under $10 000 with no indication that prosecution is pending or proceeding, go to Step 8
  • debts $10 000 and over, check the customer's record for DOCs relating to prosecution. If no DOCs exist:
    • email Fraud Investigation Branch - Coordination team
    • include details of the case, to check if the debts are covered by the reparation order
  • note the date of when the reparation and/or judgement order was placed

Is a reparation order or a judgement order in place?

7

Reparation order and/or judgement order in place

Orders made before bankruptcy:

  • only recoverable by 'proving' the debt for the bankruptcy
  • cannot be recovered after the person has been discharged from bankruptcy

Was the reparation order and/or judgement order obtained before the date of bankruptcy?

  • Yes, the debt is not recoverable after bankruptcy. Permanently write off the debt. See Table 4 > Step 3
  • No, the reparation/judgement order has no bearing on the bankruptcy, go to Step 8

8

Determine if the debt is due to fraud

Is the debt due to fraud?

  • Yes, recovery will recommence after the customer is discharged from the bankruptcy period
    • any debt incurred by fraud that forms part of a bankruptcy, must be rolled over into a subsequent bankruptcy(s), whether concurrent, consecutive or otherwise
    • the creditor (Services Australia) can pursue the debt(s) by the usual methods after the customer has been discharged from bankruptcy
    • see Table 4 > Step 1
  • No, recovery will not recommence after the customer is discharged from bankruptcy. See Table 4 > Step 3

Write off debt, review process and discharge of bankruptcy

Table 4: For staff in the Debt Administration and Bankruptcy Team.

Expand table

Step

Action

1

Temporarily write off the debt until the customer is discharged from the relevant bankruptcy

Use the Debt Recovery script when actioning a debt.

Reason codes for Bankruptcy write off:

  • BRT - possible future recovery
  • BRD - Discharged, No Fraud

Include these details in 'Comments' on the Add Write Off (OPWOA) screen:

  • reason for write off
  • bankruptcy number (dated: dd/mm/yy)
  • discharge date (dd/mm/yy)

Determine date for temporary write off. If the Sequestration Order and the Statement of Affairs (SOA) have:

  • been lodged, the debt is written off for 3 years from the date of the SOA
  • not been lodged, the debt be written off for 3 years from the date of the Sequestration Order

Advise customer of the outcome:

  • send a DRC - Recoverable/non recoverable debt(s) customer bankrupt (Q217) letter. Advise whether recovery will recommence at the end of the bankruptcy period
  • record details on a DOC. Provide the reasons for a fraud determination

2

Record the review(s)

In Customer First, create a manual review on the Review Registration (RVR) screen and complete fields as follows:

  • Service Reason: DMN
  • Review Reason: REV
  • Due Date: one month before the end of the bankruptcy period
  • Source: INT
  • Date of Receipt: today's date
  • Notes: 'Send a DRC - recoverable/non recoverable debt(s) customers bankrupt (Q217) letter to the customer.'
  • Keywords: BRT
  • Workgroup: leave blank
  • Position: leave blank
  • Transfer to Region: leave blank

The review will mature on the Due Date coded in the RVR activity. Workload Management will allocate the review for manual action.

If the Sequestration Order and the SOA have not been lodged, create a second manual review on the RVR screen and complete the fields as follows:

  • Service Reason: DMN
  • Review Reason: REV
  • Due Date: 12 months from the write off date
  • Source: INT
  • Date of Receipt: today’s date
  • Notes: 'Follow up receipt of the SOA.'
  • Keywords: BRT
  • Workgroup: leave blank
  • Position: leave blank
  • Transfer to Region: leave blank

The review will mature on the Due Date coded in the RVR activity. Workload Management will allocate the review for manual action.

A Q217 is sent:

  • when a debt is temporarily written off for bankruptcy
  • one month before the end of bankruptcy period to advise recovery will continue after the customer is discharged

Go to Step 5.

3

Permanently write off the debt

Use the Debt Recovery script when actioning a debt.

For permanent write off debts:

  • use reason code 'BRD' - Bankruptcy Discharged, No Fraud
  • provide details in 'Comments' on the Add Write Off (OPWOA) screen

Advise the customer of the outcome:

  • send a DRC - Recoverable/non recoverable debt(s) customer bankrupt (Q217) letter. Advise whether recovery will continue at the end of the bankruptcy period
  • record details on a DOC confirming determinations made for the permanent write off

4

Debt period is after the date of bankruptcy

If the debt period is after the date of bankruptcy:

  • continue recovery as normal
  • record details on a DOC as to why the debt is not covered by the bankruptcy

Check with AFSA about special considerations for recovery from assets, which may be included in the bankrupt estate (for example, bank accounts):

  • send DRC - Recoverable/non recoverable debt(s) customer bankrupt (Q217) letter to the customer
  • advise that the debt is not included in bankruptcy and recovery will continue

5

After discharge of bankruptcy, recommence recovery of debt

Has a DRC - Recoverable/non recoverable debt(s) customer bankrupt (Q217) letter been sent to the customer in the past 4 weeks?

A Q217 is sent:

  • when a debt is temporarily written off for bankruptcy
  • one month before the end of bankruptcy period to advise recovery will continue after they are discharged