TN 47 (03-23)

GN 02215.225 Bankruptcy Petition Pending — Refund Received or Underpayment Determined

A. Policy

The automatic stay of collection when a bankruptcy petition is pending precludes the withholding of any part of an underpayment accruing for a month that a bankruptcy petition is filed (as in a pending waiver situation, GN 02210.006 2.c.) and even prevents accepting and crediting an unsolicited voluntary refund.

B. Procedure - Proof of Claim Filed

1. Refund Received

Due to systems limitations, a refund may be deposited and the debt improperly reduced (or eliminated).

If a Proof of Claim is pending and an improper deposit comes to the PC's attention (e.g. a refund request):

  • Delete the refund posting, and

  • Return the remittance to the sender with an explanation that recovery of the debt is delayed pending the outcome of the bankruptcy petition.

2. Underpayment Due

Due to systems limitations, the full amount of an underpayment is withheld without regard to a bankruptcy notice.

If a Proof of Claim is pending and the PC becomes aware of an incorrect withholding:

  • Pay any additional benefits due for the month of bankruptcy filing (i.e., the date of the bankruptcy notice) and/or any subsequent months, and

  • Advise the Office of General Counsel (OGC) accordingly.

3. Retroactive Benefits Due

If Proof of Claim is pending and retroactive benefits are due in a re-entitlement situation, do not withhold the retroactive benefits to recover or reduce an overpayment unless there is an overlapping period.

4. Examples

EXAMPLE 1: Cliff Brown's period of disability ceased and he is overpaid $4500 for 07/06-10/06. Mr. Brown files a bankruptcy petition in 11 /06 and the petition is still pending when a new period of disability is established effective 1/07. The award is processed in 4/07 and retroactive benefits of $3500 are due for 1/07-3/07. Pay the $3500 underpayment.

EXAMPLE 2: If, given the facts in Example 1, Mr. Brown was re-entitled to benefits effective 9/06, any additional benefits due for 9/ 06- 10/06 are withheld to refigure the $4500 overpayment (GN 02201.005). The benefits due from 11/06 (the month the bankruptcy petition was filed) are paid. Advise OGC of the reduction in the overpayment and ask if an amended Certificate of Indebtedness (GN 02215.200B.) is needed.

C. Procedure- No Proof of Claim Field

If an underpayment is determined and/or a refund is received when a Proof of Claim was not filed, follow GN 02215.230B. to determine disposition of monies.

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GN 02215.225 - Bankruptcy Petition Pending — Refund Received or Underpayment Determined - 03/23/2023
Batch run: 03/23/2023