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Effect of bankruptcy on family assistance overpayments 107-04080100

For Debt Staff.

This page contains information about the effect of bankruptcy on Family Tax Benefit (FTB) and Child Care Subsidy (CCS) overpayments.

On this page:

Customer becomes bankrupt

Finalising bankruptcy activities

Customer becomes bankrupt

Table 1

Step	Action
1	Check the benefit type of all outstanding overpayments/debts Use the Debt Recovery script to action a debt. View the Benefit Type field on the General Information (OPGI) screen for the relevant Debt ID. For: Family Assistance (Administration) Act overpayments, for example, FTB and CCS, go to Step 2 all other debts, see What to do when a customer is bankrupt
2	Report to Creditors Has the Australian Financial Security Authority (AFSA) sent a Report to Creditors (original or a copy)? Yes, store the report in a central spot on site, for example expanding file by year. Do not batch store. Go to Step 3 No, contact AFSA to confirm the following details. Equifax IQ Connect searches can give details but not the Statement of Affairs: name and date of birth bankruptcy number date of bankruptcy eligibility for early discharge. This only applies to bankruptcies in place as at 4 May 2003 amount listed on the Statement of Affairs for Services Australia is correct if there is likely to be a return from the bankrupt estate
3	Check the overpayment reason for each Debt ID If the overpayment reason is: for reconciliation or re-reconciliation, go to Step 4 FTB Non Lodger, go to Step 4 FTB qualification (non-income related), for example dependent child left care. Go to Step 5
4	Reconciliation debts For each Debt ID, check the: financial year it relates to. Use the end date of the overpayment on the Modify/Assess Debt (OPMA) screen first date reconciliation was finalised for that financial year. View the FAO Reconciliation & Claim Summary (FRCS) screen for the financial year. This may display as Reco Finalised, Reco Completed, Re-Reco, etc For CCS debts, check the Action History and Notes tabs in Process Direct. The date that reconciliation was first completed should align with the date registered on the General Information (OPGI) screen in the Debt Management and Information System (DMIS). This date determines whether to include the overpayment in bankruptcy. The result of the initial reconciliation does not matter (positive, negative or no change). For help when this is difficult to determine, refer to the APS5 Bankruptcy Officer. Was the first date finalised before the date of bankruptcy? Yes, go to Step 6 No, see Table 2 > Step 7
5	Check the date the FTB overpayment was identified This will usually be the date it was registered on DMIS. View the date registered on the General Information (OPGI) screen. Was the date the overpayment was identified before the date of bankruptcy? Yes, go to Step 6 No, see Table 2 > Step 7
6	Check for refund Is a refund of repayments payable to a bankrupt customer? Yes, refund the payments to the customer No, go to Step 7
7	New debt raised that applies to existing bankruptcy period Does the debt apply to an existing bankruptcy period? Yes, key the details of the debt on the AFSA portal No, go to Step 8
8	Bankrupt estates - proof of debt If a customer was bankrupt before the agency becomes aware, any pre-bankruptcy overpayment may still be sought through the bankrupt estate. Notify the bankruptcy trustee of the overpayment. They may have distributed assets. According to the trustee, is there likely to be a return from the bankrupt estate? Yes, the trustee may need a Proof of Debt. This enables Centrelink to be listed as an unsecured creditor: if the trustee forwards the relevant form, complete it using details from DMIS, for example OPGI screen. Lodge the form with the trustee. Protect the customer's privacy when lodging the form see Table 2 > Step 1 No, see Table 2 > Step 1

Finalising bankruptcy activities

Table 2

Step	Action
1	Reparations or judgement orders Special instructions exist for customers with these orders. To check if an order is in place or pending: for debts under $10,000, if there is no indication that prosecution is pending or proceeding, go to Step 2 for debts $10,000 and over, check the DOCs about prosecution. If DOCs indicate case pending or proceeding, or no DOC exists: send an email to the Fraud Investigation Branch - Policy Team include details of the case to check if an order is in place or pending, and the debts covered by it. Make note of the date the order was placed Is a reparation order or a judgement order in place? Yes, and the order was obtained: before the date of bankruptcy, the debt is not recoverable after bankruptcy. Go to Step 6 on or after the date of bankruptcy, the order has no bearing on the bankruptcy. Go to Step 2 No, go to Step 2
2	Is the overpayment due to fraud? For help, see Deciding whether a debt was due to fraud for a bankrupt customer. For most reconciliation and non-lodger overpayments, there is not enough evidence of guilty intent for it to be fraud. CSS debts can be raised against the customer and/or the provider. Check the debt is not due to fraud via the Account Payable (OPAOD) screen. Is the debt due to fraud? Yes, refer the case to the APS5 Bankruptcy officer for help. Go to Step 3 No, recovery of the debt will not restart after the customer is discharged from the bankruptcy. Go to Step 6
3	Bankruptcy officer review of fraud Does the APS5 Bankruptcy officer agree that the debt is due to fraud? Yes, recovery of the debt will restart after the customer is discharged from the bankruptcy. Go to Step 4 No, recovery of the debt will not restart after the customer is discharged from the bankruptcy. Go to Step 6
4	Temporary write off Use the Debt Recovery script to record the temporary write off: use the code BRT (possible future recovery) the write-off is until the customer is discharged from bankruptcy. This is usually 3 years on the Add Write Off (OPWOA) screen, include in the Comments field: the reason. For example, bankruptcy bankruptcy number dated dd/mm/yy discharged date dd/mm/yy any dividends or reports to be received Send the customer a Q217 letter to advise whether or not recovery will restart after the bankruptcy period. Record all details on a DOC. Explain the reasons for the decision about fraud. If a customer offers to repay the overpayment during the bankruptcy period, payment cannot be accepted. This is the case even though AFSA may have given this advice to the customer. During bankruptcy AFSA or the trustee manages all the customer's assets and debts. Is the customer eligible for early discharge? Yes: in Customer First create a manual review on the Review Registration (RVR) screen and complete the fields as follows: Service Reason: DMN Review Reason: REV Due Date: 6 months after bankruptcy date Source: INT Date of Receipt: today’s date Notes: 'Contact AFSA to confirm if customer has been discharged from bankruptcy.' 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 No, go to Step 5
5	Record a review The review is to send a second Q217 letter to the customer. A Q217 is sent: when recording the temporary write off, and one month before the end of the bankruptcy period, as a reminder In Customer First,create a manual review on the Review Registration (RVR) screen and complete the 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: 'Initial Q217 issued DD/MM/YYYY. Issue second Q217 letter to 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. Procedure ends here.
6	Permanent write off now Use the Debt Recovery script to record a permanent write off. On the Add Write Off (OPWOA) screen, use reason code BRD (bankruptcy discharged no fraud). Send Q271 letter to the customer to advise recovery will not restart Record details on a DOC. Confirm the reason for the permanent write-off. Procedure ends here.
7	The overpayment is not included in bankruptcy Continue recovery as normal: if seeking to recover from assets, for example a bank account, first check it is not part of the bankrupt estate. Check this with AFSA or the bankruptcy administrator record details on a DOC. Confirm why debts are not covered by the bankruptcy send Q217 letter to the customer to advise the debt is not included in bankruptcy and recovery will continue Procedure ends here.
8	After discharge of bankruptcy Any FTB payments or top-ups paid at reconciliation or re-reconciliation are payable to the customer. Restart recovery. For help, see: Negotiation of debt repayments with customers Managing recovery and non recovery of Centrelink debt Has a Q217 letter been sent to the customer in the past 4 weeks? Yes, procedure ends here No: contact the customer to negotiate an arrangement send a Q217 to the customer