11. Supporting information - Appendix 3 - Write off and set aside
Gateshead Council will strive to collect all debt owed and use robust procedures, legal recovery options and external recovery agencies to ensure the maximum income is collected.
However, there can also be a sound business case to write off debt if it is unrecoverable or uneconomical to recover. For instance, former tenant arrears where the debtor is untraceable.
Debts that have been written off will be reinstated where information is received about the debtor that would permit recovery to be recommenced. This particularly applies to those who left their tenancy with debt and then apply for re-housing.
Before considering write-off, former tenant debt may be passed to an external debt recovery agency for collection.
There is also a strong case to set aside partial debt owed by vulnerable current tenants when it results in payment of a priority debt that otherwise would not have been collected and helps to sustain tenancies. For example, a customer with rent arrears and a court costs debt may be incentivised to clear the rent arrears if the court costs debt is set aside.
Former tenant debt - criteria for write-off
1. Small balance uneconomical to pursue
If there is no response to the initial letter and the balance is less than £30.00, the debt can be automatically written off as being uneconomical to pursue.
2. Tenant deceased and there are no funds in their estate
Where the executors of the deceased's estate or the next of kin advise there is no estate, the debt may be scheduled for write-off.
Where the deceased debtor was jointly and severally liable for the debt, as in the case of a joint tenancy, the debt cannot be written off. The surviving joint tenant will be obliged to pay.
3. Tenant in care home
Where contact is made with the next of kin or representative and written confirmation received that there are no assets, the debt can be scheduled for write-off. Where further information is known, additional checks will be made to ascertain if there are funds to pay the debt.
4. Sensitive cases (social reasons)
Write-off may be authorised in sensitive cases where recovery or legal action to pursue the debt could cause undue distress due to a severe medical condition or vulnerability.
In such cases, confirmation in writing by a professional caseworker or support agency will be necessary.
Situations may include:
- where the former tenant is suffering from serious long-term or terminal or acute illness
- is mentally ill
- is particularly vulnerable or fragile because of advanced age or disability
- is now in care or a nursing home
5. Bankruptcy
Bankruptcy applies to an individual. When an individual is made bankrupt, they are protected from their creditors for all debts incurred up to and including the date of the bankruptcy. In these situations the outstanding debt can be scheduled for write-off.
This is except where the tenancy was a joint tenancy and the non-bankrupt tenant can be pursued for the debt, as they are jointly and severally liable.
6. There is no evidence to support the debt
This is where recovery action has been taken but the former tenant is challenging liability for the debt and it would be unsafe to take legal action without supporting documentary evidence to substantiate the claim.
7. Statute barred
There are time limits in which to take court action to recover debts defined under the Limitation Act 1980 as "limitation periods". For most debts this period lasts for 6 years. Any debt which has reached its sixth anniversary and has not been secured by means of a County Court judgment, liability order or acknowledged by the debtor, is statute barred because it cannot be pursued legally. In most cases, debt arising from unpaid rent will have a money judgement against it following the making of a possession order, so this time limit will not apply.
Debt that is statute barred can be 'reactivated' if the debtor acknowledges the debt. Acknowledgement of the debt would include a written agreement or proposal to pay the debt or the debtor making a payment towards the debt. If a debt is acknowledged the 6-year period starts again.
8. Forwarding address known but debt uncollectable
Where a forwarding address is known and internal and external recovery methods have been exhausted but no payments have been received, the debt can be written off. This will take into account the action taken, and whether it is economically viable to continue to recover this debt.
9. No forwarding address is available
Where we have attempted tracing on 2 occasions over a period of 6 months and the debtor has not been traced, then the debt may be scheduled for write-off. A suite of tracing options is used including use of Experian, external tracing agencies, 192.com and the electoral roll. A further trace will be attempted 1 year after write-off.
Former tenant credits
Prior to write off, any credit amount will be offset against any other former tenant debt that is outstanding. The former tenant will then be sent a refund of any remaining balance.
The balance of a credit can be considered for write-off where:
- the former tenant has absconded
- the request is returned as 'not known at this address'
- there is no known forwarding address
- the former tenant is deceased
Current tenant debt - criteria for write-off or set aside
1. Statute barred
There are time limits in which to take court action to recover debts defined under the Limitation Act 1980 as "limitation periods". For most debts this period lasts for 6 years. Any debt which has reached its sixth anniversary and has not been secured by means of a County Court judgment, liability order or acknowledged by the debtor, is statute barred because it cannot be pursued legally. In most cases, debt arising from unpaid rent will have a money judgement against it following the making of a possession order, so this time limit will not apply.
Debt that is statute barred can be 'reactivated' if the debtor acknowledges the debt. Acknowledgement of the debt would include a written agreement or proposal to pay the debt or the debtor making a payment towards the debt. If a debt is acknowledged, the 6-year period starts again.
2. Bankruptcy
Bankruptcy applies to an individual. When an individual is made bankrupt, they are protected from their creditors for all debts incurred up to and including the date of the bankruptcy. In these situations the outstanding debt can be scheduled for write-off.
This is except where the tenancy was a joint tenancy and the account is a former account as the debt is still collectable.
3. There is no evidence to support the debt
This is where recovery action has been taken but the tenant is challenging liability for the debt and it would be unsafe to take legal action without supporting documentary evidence to substantiate the claim.
4. Set aside of lower priority debt to sustain tenancy for a vulnerable customer
There is a strong case to set aside partial debt owed by vulnerable current tenants when it results in payment of a priority debt that otherwise would not have been collected and helps to sustain tenancies. For example, a customer with rent arrears and a court costs debt may be incentivised to clear the rent arrears if the court costs debt is set aside.