TN 23 (02-08)

A. Policy

1. General

The PC has the overall responsibility of assuring that the bankruptcy petition is handled properly and expeditiously.

2. Chapter 7

A Chapter 7 petition applies to all existing debts whether or not specifically included in the petition. For the definition of an existing debt, see GN 02215.185C.1.

3. Chapter 13 or 12

A Chapter 13 petition applies only to those debts listed in the petition (GN 02215.185C.4.). However, SSA is precluded from further collection efforts on any debt that arose before the filing of the bankruptcy petition, whether listed or not. A repayment plan usually runs for 3 years but 5 year plans are allowed. Therefore, recovery must be stopped where necessary. Also, if the time limit for filing a Proof of Claim has not expired, a claim must be filed on any existing debt, listed or unlisted, unless an exception to filing applies (see GN 02215.195F.).

B. Procedure - General

Use the chart below to determine how to handle bankruptcy notices.

C. Procedure - Chapter 7

If the notice is received from other than the FO, stop recovery (GN 02215.195E) and follow GN 02215.200 for filing a Proof of Claim, if appropriate.

D. Procedure - Chapter 13 or 12

1. Initial action

If the Chapter 13 notice is received from other than an FO, check PACER and obtain the following information:

• Whether or not SSA is a listed creditor, and

• The specific SSA debt involved, and

• The length of the repayment plan, and

• A copy of the plan if not included with the notice.

Request the FO to obtain the information if that is the only way to obtain it.

2. Subsequent action

Once all information is received, proceed as follows:

• Verify that recovery is stopped in accordance with GN 02215.195E. below.

• Prepare the necessary documents for filing a Proof of Claim for any debt that arose before the filing of the bankruptcy petition (listed or unlisted) unless an exception to filing applies (GN 02215. 195F).

• If a Proof of Claim will not be filed because the time limit for filing has expired and SSA's debt is not listed, input a PCACS diary with a due date that corresponds with the year the repayment plan will end.

• If the time limit for filing has expired but fraud or similar fault is involved, contact the RCC to determine the next action.

• If multiple debts are involved but only one debt is listed and the time period for filing a Proof of Claim has expired, proceed as follows:

• Discontinue collection for all debts (including penalties) in accordance with GN 02215.195E.3. below; and

• Input a PCACS diary with a due date that corresponds with the year the repayment plan will end for the unlisted debt.

3. Examples

EXAMPLE 1:  A Chapter 13 notice is received from the RO. The petitioner has an outstanding $4,000 Title II overpayment and a $3,200 Title XVI overpayment. Check PACER for specifics. SSA is listed as a creditor for the $3,200 Title XVI debt, and the length of the plan is 5 years beginning June 2005. Stop recovery of the Title II debt in accordance with GN 02215.195E.2. below and file a Proof of Claim for the $4,000 debt amount. Alert the appropriate FO of the Title XVI debt and send the notice to that FO.

EXAMPLE 2: If, given the facts in the above example, the time period for filing a Proof of Claim has expired, stop recovery of the Title II debt in accordance with GN 02215.195E below. Input a PCACS diary for the $4,000 Title II debt.

E. Procedure - Stopping recovery

1. General

If the FO did not stop recovery efforts, immediately stop any adjustments (including cross- program adjustment) or efforts (including follow-up notices or bills, TOP, etc) to obtain repayment effective with the current operating month. It is immaterial that a debtor has agreed to repay by monthly installments.

If we subsequently receive any indication that we are/will be in contempt of court because collection activity was not stopped timely, contact the appropriate Regional Chief Counsel Office. If SSA had provided the Bankruptcy Court with the proper address where bankruptcy material should be sent, include this information. If notification is received, refund anything collected in violation of the stay.

NOTE: The input to ROAR to stop recovery will depend on whether a Proof of Claim will be filed.

2. Filing Proof of Claim

If a Proof of Claim will be filed:

• Input a DFBP screen with the Proof of Claim = 1 Filing (MSOM DMS 007.006)

• Input the following special message to the MBR:

  “Chapter (type) Bankruptcy Claim, $(amount) Overpayment: DO NOT TAKE ANY RECOVERY ACTION, Proof of Claim Filed.”

• Follow up with the Chief Counsel if notice of a discharge or court ordered repayment plan has not been received when the automated 12 month follow-up period ends. Rediary for 6 months via a DRDY screen.

• Annotate DMS remarks with the information regarding the actions being taken.

3. Not filing Proof of Claim

If a Proof of Claim will not be filed:

• Input the DFBP screen with a Proof of Claim = 4 Bankruptcy — Delayed Collection (GN 02215.195D.2.).

• Input the following special message to the MBR: “Chapter (type) Bankruptcy Claim, $(amount) Overpayment: DO NOT TAKE ANY RECOVERY ACTION: Proof of Claim Not Filed.”

• Annotate DMS remarks with the information regarding the action being taken.

IMPORTANT:  Be sure to delete any penalty when the DFBP screen is annotated with a 2.

F. Procedure - Exception to filing Proof of Claim

Do not prepare a Proof of Claim in a bankruptcy proceeding under the following conditions:

• The debt is less than $3,000; or;

• The debt has been reported to DOJ for civil suit. In such case, forward the bankruptcy notice to DOJ through the RCC; or

• The bankruptcy notice indicates that a Proof of Claim should not be filed; or

• The bankruptcy notice indicates that unsecured creditors (SSA is one) will not receive any monies; or

• A Chapter 7 bankruptcy notice indicates that there are no assets; or

• The 180-day time period for filing a Proof of Claim has expired and fraud is not involved.

When any of the above exceptions apply, discontinue collection efforts in accordance with GN 02215.195E.3.

NOTE: The RCC may determine that a Proof of Claim should be filed for debts of less than $3,000 in certain situations.

IMPORTANT: Contact the Regional Chief Counsel if a bankruptcy petition is received when Court Ordered Restitution or a Civil Monetary Penalty is involved.

G. Procedure - Filing Proof of Claim

If none of the exceptions in GN 02215.195F above apply, prepare the necessary documents for filing a Proof of Claim (GN 02215.200) and refer to the RCC.

When the claim must be received by the court within 15 working days or less, after the PC learns of the bankruptcy proceedings, call the Chief Counsel, so that, where appropriate, an extension of time for filing can be requested.

In those cases where it is still possible to file a Proof of Claim within the established time, discuss with the RCC, sending the Proof of Claim directly to the U.S. Attorney.