Debt relief orders and monthly payments of backdated benefits

I have vulnerable clients waiting to hear if they are eligible for the limited capability for work and limited capability for work-related activity elements of universal credit.

We are concerned that backdated awards of the universal credit elements will affect the £2000 asset limits for a debt relief order (DRO). They are also waiting for the outcomes of personal independence payment assessments.

Can clients ask the DWP to pay lump sums in instalments? How are monthly payments of backdated benefits treated in a DRO?

Can backdated benefit lump sums be paid in monthly instalments?

Yes, the Secretary of State has the power to make 'payment of arrears of benefit by instalments' where:

• it is considered necessary to protect the interests of the client

• the client agrees for the backdated payment to be paid in instalments

It might be necessary to protect a client's interest when they struggle to manage their money or have an addiction.

Guidance

Department for Work and Pensions guidance expands on paying lump sums in instalments. It confirms that the option only applies to 'arrears of delayed payments for past periods' and not to 'on-time payments of current entitlements.'

Government guidance refers to the 'Advanced Customer Support Team'. This team considers the client's best interests taking into account their individual circumstances.

See the explanatory memorandum to the regulations for the policy background including guidance for joint claimants.

Treatment of monthly payments of backdated benefits in a DRO

The DRO team confirmed that backdated lump sum payments received as monthly payments are viewed as income.

Personal independence payment

Monthly payments of backdated personal independence payment can be offset under adult care costs.

This means the DRO intermediary includes the amount of the monthly payment in the application. They include the same amount as an expense for adult care costs.

Universal credit

Elements for limited capability for work and work-related activity in universal credit are not offset against care costs unless the debtor can show evidence.

The DRO team need to see the limited capability for work elements award letter when considering a DRO application.

Find the debt relief orders guidance for debt advisers on Gov.uk.

What does this mean in practice?

A DWP decision maker might decide that a client should receive backdated benefits as a monthly instalment instead of a lump sum. It is up to the claimant whether they agree to this. Agreeing to monthly payments might be a suitable option if this means the client's surplus income does not exceed the £75 per month DRO income limit.

Check with your office policy or line manager to see if there is guidance on whether monthly instalments is in a client's best interests.

The DRO team’s opinion is that the client should consider the implications for their own circumstances.

Further resources

Read more about treatment of disability benefits and premiums in a DRO on Shelter Legal.