USE by DWP of making a deceased claimants estate insolvent in order to allow a charging order to recover PC Overpayment debt

I would be grateful if anybody could share their experiences of this if the DWP have used it in respect to their clients.

My client died leaving a pension credit overpayment debt. Even though his wife was on the pension credit claim – because it was not her duty to disclose a savings account that he had – they can’t seek recovery from her directly and are seeking recovery from the estate.

There is no money left in any other assets and on the form the DWP sent my client they asked his wife to give details of property -  including the property she lives in. (no mortgage)

I then went about trying to find out whether they could legitimately place a charging order on her house. Both her and her husband’s names were on the deeds of the property and under normal circumstances, this property would pass directly to her without being included in probate.

I have managed to establish (via our specialist debt support) that in theory the DWP could apply for an insolvency administration order to bankrupt her husband’s estate and therefore reverse the normal procedure of passing a jointly owned property to the widow.

This will be the only way that they could secure the debt owed. I am trying to find out whether in practice they actually use this and if other case workers have experienced it.

This is in terms of advising her of whether it would be an option to make an arrangement to repay or just wait to see what happens with Department of Work and Pensions action against the state.

Having had dealings with the RFE team I doubt they’d have the wit to do that.

I’ve deleted my next comment; my opinion of RFE is not the greatest…

RichardP - 07 July 2022 11:51 AM

I would be grateful if anybody could share their experiences of this if the DWP have used it in respect to their clients.

My client died leaving a pension credit overpayment debt. Even though his wife was on the pension credit claim – because it was not her duty to disclose a savings account that he had – they can’t seek recovery from her directly and are seeking recovery from the estate.

There is no money left in any other assets and on the form the DWP sent my client they asked his wife to give details of property -  including the property she lives in. (no mortgage)

I then went about trying to find out whether they could legitimately place a charging order on her house. Both her and her husband’s names were on the deeds of the property and under normal circumstances, this property would pass directly to her without being included in probate.

I have managed to establish (via our specialist debt support) that in theory the DWP could apply for an insolvency administration order to bankrupt her husband’s estate and therefore reverse the normal procedure of passing a jointly owned property to the widow.

This will be the only way that they could secure the debt owed. I am trying to find out whether in practice they actually use this and if other case workers have experienced it.

This is in terms of advising her of whether it would be an option to make an arrangement to repay or just wait to see what happens with Department of Work and Pensions action against the state.

I don’t have any practical experience of this kind of situation but I am very surprised by the advice you have had from specialist debt support. If the husband and wife were joint tenants (as most husbands and wives are) each owns the whole of the asset, rather than a distinct fractional share. When a joint tenant dies, the asset in question does not pass to his personal representatives as part of his estate. Instead, the asset automatically passes to the surviving joint tenant.  That’s basic land law. The DWP can’t bankrupt his estate to recover the overpayment from his “share” because there is no “share” and so nothing goes into his estate. But if they were tenants in common there would be a separate share, which would become part of his estate.

Paul; I was curious about that too. From what I understand, the mechanism is as follows:
(1) As you say, through survivorship the property would fall into the sole ownership of the wife without ever becoming estate property. As the bankruptcy did not occur during the life of the debtor, the automatic severance occurring on bankruptcy would not arise.
(2) A creditor who would, if the debtor were still alive, be entitled to petition for bankruptcy may instead petition the court for an “insolvency administration order” which has a similar effect to bankruptcy in relation to the estate.
(3) The trustee then, notwithstanding the passage of the property through survivorship, may claim against the survivor in relation to a property interest lost through survivorship as under s421A Insolvency Act 1986 to recover the value of the interest which was ‘lost’ to the estate.
(4) That debt might then be charged to the value of the house.

So it is not a direct attack on the survivorship principle, but a way of sidestepping it.

See further: https://www.gov.uk/guidance/technical-guidance-for-official-receivers/56-deceased-insolvents

I have no practical experience of this, but imagine that the decision of whether to take action like this would depend largely on the amount of the debt and economics of recovery.

Thanks alot for your replies - really helpful.

My concern now is whether to advise my client to fill in the form from the DWP on any assets in her husbands estate (there is only the house - no other savings) and advising her NOT to make any payment arrangement and wait to see if the DWP take appropriate action to obtain rights over recovery money from the property - as the only means of securing the debt.

My only concern is that in theory they could force a sale rather than just obtaining a charging order which they could then recovered when the house is eventually sold. This is my clients biggest worry - understandbly.

When I spoke to the DWP estate recovery they said that would not go down this route - and it would be highly unethical.

The debt is 20K ish and there an an outstanding MR which will hopefully reduce it - but I don’t know by how much - But the lower the amount of remaining debt the less likelyhood the DWP will go down the costly route of recovering.

Assuming your client is the executor for her husband’s estate, she needs to know whether there are any outstanding debts that are recoverable from that estate. As other have noted above, the house shouldn’t be treated as part of the estate if they are joint owners, so nothing to see there.  if there are insufficient funds to repay outstanding debts, which sounds like is the case, we would strongly advise seeking specialist legal advice from a probate solicitor before taking any further actions.

The diminishing capital principle means it should be impossible to achieve a situation in which an overpayment arising from non-disclosure of capital exceeds the amount of that capital.  With there being no capital limit in Pension Credit, just endless tariff income, it would take a very significant amount of capital over a very long time to produce an overpayment of £20,000.

But there are no savings in the assets he left, or she independently possesses?

Something is not quite right here, and I suspect that something might be the overpayment calculation.  Do you have details of how it is alleged to have happened: the amount of capital, the amount of SPC entitlement they had and the period over which the overpayment accumulated?  I suspect they haven’t done the diminution calculation, which could reduce it almost to coppers.

I have decided to ensure any action on the estate is halted until an MR is done resulting in a proper calculation for the overpayment and then consider options.