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08/01/2012

Crumbs of comfort for those ‘too poor to go bankrupt’

Secretary of State for Work and Pensions v Payne & Cooper (test case) [2011] UKSC 60

This is a decision of the Supreme Court. It considers the issue of whether deductions in respect of Social Fund Loan repayments and overpaid benefits can continue to be made after the making of a DRO during the moratorium period of 1 year after which time the debt will be written off. It also tidies up the existing law and introduces coherence which both parties sought.

Mrs. Payne had received a Social Fund loan of £843 in September 2007. In August 2009 she obtained a DRO listing the SF loan as a qualifying loan. On being informed of this the Secretary of State started to make deductions. Mrs. Cooper was determined to have been overpaid benefit and in December 2009 the Sec of State began making deductions from her ongoing benefit entitlement. In January 2010 she obtained a DRO listing the overpayment as a qualifying debt. The Sec of State continued to recover the overpayment.

The Supreme Court held that the Secretary of State for Work and Pensions cannot recoup loans and overpayments during the moratorium of a Debt Relief Order. (This is for the 1 year period after a DRO has been made). After that time the debt is written off for good.

The judgments of Cranston J in the High Court and the Court of Appeal were upheld. Further – the Supreme Court ruled that recovery of overpayments and Social Fund Loans from debtors should be brought into line. Henceforth bankruptcies shall not be treated differently from Debt Relief Orders. The cases of R V Secretary of State for Social Security ex p Taylor and Chapman [1997] BPIR 505 where it was held that deductions can continue to be made between the making of a bankruptcy order and the bankrupt’s discharge from bankruptcy were said to be wrongly decided. The case of R (Balding) v Secretary of State for Work and Pensions [2007] EWCA Civ 1327 [2008] 1 WLR 564 where it was held that once a bankrupt is discharged the liability to repay the Secretary of State is also discharged was said to be rightly decided.

1 Comment

  1. Rentergirl

    I am more impressed that she managed to get such a large social fund loan. They are not easily won (and are set to be abolished.)

    Reply

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