7.13.4.1 — After the bankrupt has been discharged from bankruptcy, the important consideration is how the debt arose. If the debt is generally attributable to fraud (paragraph 205(1) (a) VEA refers) as described in paragraph 153(2) (b) of the Bankruptcy Act 1966, the Department can continue to seek recovery after discharge via payment notices issued under section 205A VEA.

7.13.4.2 — Paragraph 153(2) (b) of the Bankruptcy Act 1966 states that the discharge of a bankrupt from a bankruptcy does not release the bankrupt from a debt incurred by means of fraud or a fraudulent breach of trust to which he or she was a party or a debt of which he or she has obtained forbearance by fraud. In these cases, a review of the debt should be conducted and appropriate recovery action taken. If it is considered that the debt in question arose due to fraud on the part of the debtor, the case should be referred to the Legal Services Group, National Office for advice on whether the debt may still be pursued.

Note:For further information in determining whether fraud has occurred refer to this manual's Section 5.9 Fraud Investigations.

7.13.4.3 — It is also important to remember that debts arising due to fraud may be pursued during the bankruptcy period via deductions from pension, as long as the amount owing is an overpayment for the purposes of paragraph 205(2) (a) VEA.

7.13.4.4 — Where a debt is attributable to fraud and a partial dividend has been paid from the estate, recovery action on the balance outstanding can continue after discharge.

7.13.4.5 — Where a debt is not attributable to fraud and the dividend is insufficient to cover the whole debt, any balance remaining is irrecoverable at law and should be written off after the bankrupt is discharged.

7.13.4.6 — If having read this section, you are uncertain about the Department's powers to recover money in any particular bankruptcy situation, you should, after consultation with your manager, seek legal advice from the Legal Services Group, National Office.