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Capital and debt - best course of action
Hi all,
I just wanted to see if I could get some thoughts on the best course of action for a client.
He is 72 years old and living permanently in a care home. The local authority has recently obtained a deputyship order for him and that team have approached us for assistance in dealing with his debts. He has capital of £37,000 and a debt of £58,000 but its expected this will rise to about £62,500 as they are waiting on a further Pension Credit overpayment. His income is state pension, a private pension and PIP mobility.
The debt includes £29,500 owed to adult residential services for care home fees, about £5,000 owed on a Housing Benefit overpayment and currently almost £5,000 owed on a Pension Credit overpayment but, as I stated, they are expecting notification of another Pension Credit overpayment of about £4,500. All the other debt is non-priority loans etc.
I considered full and final settlement offers but I’m not sure if DWP would accpet this for the Pension Credit overpayment as it is public funds, and they could do an attachment to his state pension for recovery of the debt. I think the local authority (for the adult residential services and HB overpayment) would likely accpet an offer as would all the other creditors.
I did consider prioritising DWP and the local authority but the technically they are all non-priority debts and doing so could have an impact on taking any further action needed such as bankruptcy. I assume DWP could be treated as a priority creditor, given they can do the attachment to state pension, though so I think this would possibly be accepted if I paid them first and then done a DRO or bankruptcy for the rest but what would be the point if at the end of the day all capital is going to be used for the debt no matter what way I approach it.
He would be unable to apply for a DRO currently due to being over the limit for both the capital and the level of debt.
I thought maybe Bankruptcy would be the best option as the official receiver would then just do what I would in terms of using the capital to share out between the creditors and then all remaining debt would be written off. There would be no income payments order as all his income is paid in care home fees.
In terms of his capacity, it appears that a number of assessments were done over the last few years and it was felt he had capacity until recently when the deputyship order was granted. Therefore, when he took the loans etc. and incurred some of the benefit overpayments he was acting for himself and had been found to have capacity. I’m not sure when this changed and the overlap with any benefit overpayments etc. and I’m not sure if I should look further into this as no matter what his debt is double his capital, so he is likely to have to use it all to have to deal with the debts. I have been advised that the benefit overpayments all seem to be due to undisclosed capital. I am aware that a request was previously made to write off some of the adult residential fees and it doesn’t look like this was done.
Just thought I would see if anyone has any thoughts on what seems the best course of action for the client .
Just been chatting with our social care specialist about this case. He has questioned the local authority having been appointed deputy for this client as there should be no conflict of interest in this appointment being made.
You state that the client owes £29,500 in unpaid care home fees to the same local authority - can they be shown to be acting independently and in his best interests with respect to a debt that they feel is owed to them in a situation like this?
We wondered whether, in the first instance, it might be worthwhile contacting the Court of Protection to seek their guidance as to how best to proceed? How and why did the care home fees debt arise and was there any culpability on the local authority here for example? Local authorities do have quite extensive powers to recover debts but can they meaningfully negotiate with themselves to ensure the optimal outcome for him (notwithstanding the other overpayments you have mentioned)?
You’ve said he had capacity until “recently” and then the deputyship was made and in our experience, these applications are taking up to a year to come through so there could have been quite an extended period of time where he didn’t have capacity but had no-one formally acting for him - is this the source of the debt for fees for example? There are a lot of questions that need answering before trying to look at how to resolve these “debts” we believe.
Morning,
Thank you for your reply.
I have had a look at the social care records but there is a huge amount so haven’t gone through all of these in detail.
It looks like he was referred to social services in 2018 and a care package was put in place for him at home. There was then contact from his bank in early 2020 as they were concerned about his capacity and possible financial abuse. He was found to have capacity at that time. He was sent to the care home for respite in late 2020. There continued to be assessments in relation to his capacity and he was also objecting to the care. A S.21A application was made in summer 21 for a decision on whether he should stay in the care home. In September 21 I can see contact form the care home in relation to the fact no payments had been made towards his contribution to the care home fees and they were considering taken legal action (obtaining a CCJ). This is when someone asked if any fees could be written off given the client had been objecting to the care being provided. This was refused but no action was taken in relation to a CCJ. A report was completed in Dec 21 finding him to lack capacity and a decision made by court in Jan 22 that he should remain in the care home and have an appointee or deputy. At this time a referral was made to the Deputyship team who obtained the deputyship order in June 23 (so it looks like it did take over year and during that time he lacked capacity).
I’m not sure of when the PC and HB overpayment are from yet but I will look into whether we can challenge these on the basis of being found to lack capacity from Dec 21 or if Deputyship should have done something when he was referred to them in Jan 22 (although I’m not sure how this works if they didn’t get a court order until June 23 - I don’t know what they can and can’t do during that time).
I believe ARS put a hold on assessing his contribution to the care home fees on the basis of his capital while a decision was made about what to do about this capital and the debts as otherwise he would not have been entitled to any help with the costs due to being above the capital limit. Also, again I don’t think anyone knew about the capital until Deputyship got the court order in June 23 or if this is something they should have picked up on when the referral was made to them in Jan 22. Again this is something I will look into.
In terms of the LA acting as deputy and a debt being owed to the LA I don’t think this is an issue. I also work for the same LA within the Welfare Rights Service and we always deal with debts owed to the LA (rent, council tax, benefit overpayments, ARS etc) and we act in the best interest of the citizen, not the LA.
I’ll go back to deputyship and ask for further info about the benefit overpayments and see if there are any grounds to challenge these, but I doubt there is anything I can do about the arrears of the care home fees, which will take the majority of his capital.
Thanks Sarah, complex case for sure.
It’s not entirely clear who the care home fee debt is related to, as usually these would be paid by the LA on behalf of client and then the debt is with the LA, whereas you say the home were considering a CCJ. When the client lacked capacity to manage his finances, the LA should also be stepping in to arrange his case under s.19 of the Care Act as it’s obviously unrealistic to expect the client to pay fees then. If LA does this, they can still seek to recoup money from the client but again,. you would expect the debt to be to them and not the care home.
Even if he would have been a self-funder when he moved in, with capital of £37,000, he’d have to spend £13,750 to come below the £23,250 capital limit at which point the LA would usually also start to pay something towards the fees, so maybe check to see whether that has happened as well? You’re in similar realms to diminishing capital in that the LA contribution would increase over time as the capital reduces until at £14,250, the capital is completely disregarded.
Just been chatting with our social care specialist about this case. He has questioned the local authority having been appointed deputy for this client as there should be no conflict of interest in this appointment being made.
You state that the client owes £29,500 in unpaid care home fees to the same local authority - can they be shown to be acting independently and in his best interests with respect to a debt that they feel is owed to them in a situation like this?
Not disagreeing with Paul about this in any way, but the potential conflict of interest may not be limited to care home fees. Unfortunately, in my experience it is very far from uncommon for corporate appointees to fall some way short in both their legal and moral responsibilities when it comes to benefit overpayments. Where a claimant has an appointee it is the legal responsibility of the appointee to make disclosure of any relevant changes of circumstance. Where a failure to disclose results in a recoverable overpayment relating to a period where the claimant had an appointee, the overpayment is recoverable from both the claimant and the appointee.
In practice what happens is that DWP inevitably go for recovery from the claimant - and the corporate appointee just goes along with this. There’s very rarely any fuss made about this - after all, the reason the claimant has a corporate appointee in the first place is that there is no family member or friend prepared to take appointeeship on. But it is the corporate appointee which has failed to disclose - why should the recovery be from the claimant’s benefits? DWP doesn’t care, so long as the overpayment is recovered, but that ought not to be an excuse for the corporate appointee…...
I’m not saying that is an issue in this particular case, but it might be.