TN 18 (07-97)

Citations:

Bankruptcy code, 11 U.S.C. Sections 523(a)(2)(A), 1224, 1324, 1325(a)(3) and 1325(a)(4).

A. Policy - time limitation

A complaint to determine discharge of a debt under Chapter 7 must be filed within 60 days from the first meeting of creditors.

B. Policy - possible objection to a discharge

1. General

Referral to the Chief Counsel for possible objection to a Chapter 7 discharge in bankruptcy must be made whenever an overpayment resulted from fraud whether or not the debtor was prosecuted.

Absent fraud, the following guidelines are used to determine referral for misrepresentation:

• The overpayment was caused by the debtor's false representation, and

• The debtor intended to deceive SSA, and

• SSA actually and reasonably relied upon the misrepresentation to its detriment.

2. False representation

Silence or concealment of a material fact can be sufficient to support a finding of misrepresentation. Accordingly, any change in circumstances which affect an individual's eligibility for benefits (such as a return to work, or a failure to continue as a full time student), which is not reported to SSA, may be viewed as a misrepresentation.

3. Intent to deceive

We can infer an intent to deceive where the debtor knowingly or recklessly makes a false representation or knowingly fails to provide material information which he/she knows or should know would cause him/her to receive benefits for which he/she is not eligible. Accordingly, in reviewing a claim to determine an intent to deceive, make sure the debtor has sufficient mental and physical ability to understand and comply with the reporting requirements.

4. Reliance on misrepresentation

SSA's reliance on the misstatement can be shown through SSA's continued payment of benefits.

C. Procedure

In all Chapter 7 situations (including no asset cases) where the debt is $3,000 or more, review the claim folder for possible referral to the Chief Counsel to consider filing an objection to discharge.

Be prepared to provide additional information and to work with the Chief Counsel in these situations.

If a claim meets the guidelines in GN 02215.196B., proceed as follows:

• Forward a copy of the bankruptcy notice (with the date set as the last day for objecting to discharge circled in red), by memorandum, to the Chief Counsel.

• Briefly explain how the debt occurred, the amount of the debt and any adjustment or refund actions.

• Advise the Chief Counsel if adjustment was stopped as a result of the bankruptcy notice and whether fraud is/was established or misrepresentation is involved. Explain the basis of the misrepresentation (e.g., debtor returned to work but failed to report).

• If a Proof of Claim will be filed (GN 02215.195G.), indicate that it will follow as soon as possible.

If an objection to discharge must be received by the court within 15 working days after the PC learns of the bankruptcy proceeding or the time within which an objection should have been filed has expired, call the Chief Counsel's office and explain the situation. If appropriate, the Chief Counsel may be able to file an extension request with the court.