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Refund of repayments payable to a bankrupt customer 107-05070020

For Debt staff.

This document outlines the impact on Centrelink debts for bankrupt customers. Not all debts cease when a customer becomes bankrupt. However, some cease to be payable for the term of the bankruptcy.

Refund of repayments to bankrupt customers

Step	Action
1	When a customer enters bankruptcy Debt staff must examine all debts to determine if a refund of repayments applies. Check the Modify/Assess Debt (OPMA) screen for each Debt ID to determine the period of the debt. If the period of the debt occurs: before the date of bankruptcy, go to Step 3 after the date of bankruptcy, go to Step 5 both before and after the date of bankruptcy, go to Step 2
2	The period of the debt occurs both before and after the date of bankruptcy Send a Fast Note to the relevant Debt Raising Team. For referral details, see the Resources page in Debt ownership. Request the debt be split into 2 new debts (before and after the date of bankruptcy). Once the debt has been split, for the debt covering the period: before the date of bankruptcy, go to Step 3 after the date of bankruptcy, go to Step 5
3	The debt covers the period before the date of bankruptcy Were any repayments made after the date of bankruptcy? Yes, go to Step 4 No, do not refund these repayments. Record details on a DOC. Procedure ends here
4	Refund the repayments made after the date of bankruptcy If the Service Officer decides a refund applies, the payment must go to the correct person. This can be the customer or the trustee. The following applies depending on the initial repayment method: Withholdings are income as they derive from the reversal of a decision to withhold payments and can be refunded to the customer Wage garnishees are income and can be refunded to the customer Third party withholdings can be refunded to the person who made the withholdings Financial Institution account garnishee, any funds received form part of the bankrupt estate, in most cases. Refund these to the trustee, not to the customer Ongoing payment arrangements are not part of the customer's income, they are the customer's property. Refund these to the trustee Reparation and judgement orders Do not resume recovery action after discharge of the customer's bankruptcy where: a reparation or judgement order is in place, and they became bankrupt after the placing of the orders If recovery has restarted after bankruptcy, refund all monies collected: during the period of the bankruptcy, and/or after discharge (excluding funds received from the bankrupt estate, which are dividends) Write off the debt. Note: if the customer has more than one debt, do not refund. Transfer payments to a debt with a period after bankruptcy. For assistance with refunds, see Transfers and refunds. Record details on a DOC. Procedure ends here.
5	The debt covers the period after the date of bankruptcy Do not refund repayments made on debts covering a period after the date of bankruptcy: recover the debt as normal record details on a DOC