Department of Human Services

Families First Online Policy Manual

Continuing  Responsibilities

Revised:

35.5

BANKRUPTCY

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Policy Statement

 

A bankruptcy order can affect the Families First grant amount.  Usually, the bankruptcy order will specify that all or a part of the Families First grant amount be paid directly to the bankruptcy court for disbursement to the individual and his/her debtors.

 

During the period the bankruptcy order is in effect, the Families First grant cannot be reduced due to an overpayment.  Even though benefit reduction cannot be imposed on a bankruptcy case while the bankruptcy order is in effect, claims must continue to be completed on any overpayments that occur after the bankruptcy order is issued.  Once the bankruptcy is discharged, recovery can be attempted on any post-petition overpayments that have occurred.

 

Other appropriate actions, such as a grant increase or decrease due to changes in income or AU size, can still be made.  In addition, disqualifications and sanctions can be imposed and cases may be closed, if appropriate.

 

Verification

 

The county will receive a bankruptcy order from the court Bankruptcy Trustee.

 

Documentation

 

Document the eligibility and case management system that the client’s case has a reduction in the grant amount due to a bankruptcy.

 

Procedures

 

When the Department is notified that a Families First recipient has filed for bankruptcy protection:

 

·        Stop any collection activity to resolve a claim.

 

·        Notify Investigations immediately to ensure the debt to the Department is included in the bankruptcy filing so that it can be discharged through the bankruptcy order.

 

·        Forward the bankruptcy order immediately to FA/Bankruptcy, Fiscal Services, in the State Office.  Following the receipt of the order, the FA/Bankruptcy worker will contact the caseworker regarding the appropriate amount to be fiated for the bankruptcy.

 

·        Contact the FA/Bankruptcy worker regarding any change in the grant amount (including case closure).  The FA/Bankruptcy worker will contact the Bankruptcy Trustee.  Prompt communication between the field and the FA/Bankruptcy worker in the State Office is essential, since there is no automated link for this part of the process. 

 

Note:  When a case with a bankruptcy order is closed for any reason (including failing to appear for a renewal), the individual is responsible for the payment to the bankruptcy court in the month following closure.

 

·        Contact the FA/Bankruptcy worker if the case is renewed so that he/she can determine that the bankruptcy order continues to remain in force and can act appropriately.

 

Glossary

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