Insolvency Service

5. Mr U says IS has not offered a suitable remedy for the errors that it made in handling his case since November 2023.

6. Specifically, it: • incorrectly said it had received a payment on his account and delayed admitting this • would not allow him to resend the payment as a resolution • delayed providing evidence the payment was not received

7. As a result, he remained trapped in bankruptcy and incurred legal and housing costs. He also says possession of his home was pursued and his health has been impacted.

8. By bringing his complaint to us Mr U would like the IS to pay him a financial remedy of £148,685.

9. The background gives a summary of the main events of the case. As such, not all details are included but have been considered, all the parties involved are aware of what happened.

10. Mr U says a third party organisation sent a payment of £191,028.76 to the IS to clear his bankruptcy in September 2023.

11. IS says between July and September 2023 Mr U’s insolvency practitioner/trustees (A) (whose role it is to take control of the assets of an insolvent person and distribute funds to creditors according to the law. They are not part of the IS) contacted it nine times to advise that Mr U had said a third party (TP) who owed him money had made a payment to settle his debts. It says the amounts given by Mr U varied each time (due to fluctuation in dollar rates) and it confirmed that it had received no payment.

12. On 18 October A sent IS a screenshot of a bank letter dated 5 September 2023 and a SWIFT payment form dated 9 October 2023 showing a payment of £191, 028.76 made to IS by TP.

13. On 6 November IS contacted A, it had checked its suspense account and been unable to locate the monies so it asked A to liaise with TP and Mr U to find out what went wrong. A told IS it had seen a SWIFT transfer document, but the account number did not exist, TP said the bank was investigating where the money had gone.

14. IS says A challenged Mr U about the payment as the account number was incorrect. Mr U contested this and said IS was responsible for locating the payment.

15. On 23 November Mr U called IS to find out whether it had received a payment of around £190,000. IS says an admin staff member identified a payment of £191,966.91 in its unidentified cases account as Mr U’s and provided an internal transaction reference number.

16. Mr U contacted the aftercare team at IS on the same day and gave it the transaction number. On 28 November the team emailed the examiner confirming they had transferred the receipt to the case stating the receipt related to a PPI payment. The team contacted the IS and provided the transaction number and amount of £191,966.91 and asked it to credit it to Mr U’s account which it did, taking the email as an approval.

17. On 29 November, the aftercare team confirmed to A that the payment had been received.

18. On 3 April A wrote to Mr U. It said since receiving the funds from IS it had been attempting to gather satisfactory evidence that the funds received were due to him personally. Mr U had provided some evidence, but A had found it insufficient and, in line with the law, could not distribute the funds. A’s plan was to gather more information.

19. On 4 November 2024 A applied for possession and sale of Mr U’s property.

Payment receipt and delay

22. Before we decide if we should conduct a detailed investigation of a complaint, we look at whether there are signs the event complained about had a negative effect which the organisation has not put right. Having done so we have found HMCTS has already done enough to put right the impact of these events.

23. Mr U says IS gave him incorrect information about the payment and delayed admitting this until April 2024.

24. IS acknowledged and apologised for incorrectly telling Mr U it had received a payment to his account. It also says on 2 April A emailed it asking for the details of the payment as they wanted to check whether there were any tax liabilities. At this point on examining the payment more closely IS realised it had incorrectly allocated the payment to his account. As soon as it became aware of its mistake IS informed Mr U and began an internal investigation.

25. Mr U says during the time it took IS to realise it had made a mistake he remained trapped in bankruptcy.

26. IS says once the payment was credited to Mr U’s account there was no further action for it to take. It also apologised for the time it had taken to discover the error and inform him. IS offered Mr U an ex gratia payment of £200 for the upset and inconvenience caused by its error.

27. Mr U says the IS offer does not recognise the financial impact of its error or the affect it had on his health. He says during the time he was under the impression a payment had been received by IS he made decisions such as putting money down on a rental and moved out of the home he shared with his (ex)partner whilst still making mortgage payments on his home. He also says he used solicitors to put together evidence needed for his complaint and the repossession instigated by A following the rescinding of the payment.

28. Our principles say when mistakes happen organisations should acknowledge them, apologise, explain what went wrong and put things right quickly and effectively. Organisations should seek to put people back in the position they would have been if nothing had gone wrong. Our principles also say organisations should act in line with its policy or procedure whether published or unpublished.

29. IS missed an opportunity to properly identify the origins of the funds in November 2023. We understand it must have been distressing for Mr H to find out IS had made an error and incorrectly assigned a payment to his account. We are sorry to hear this happened, especially as IS could have acknowledged this error earlier. It must have been distressing for Mr U to find out that the payment had been misallocated after about five months.

30. A applied for possession of Mr U’s property in November 2024. A judge granted the possession order on 25 February 2025. Mr U could have made a case to the court about the financial impact on his living costs.

31. IS complaint procedure says if it makes a mistake that could cause worry, inconvenience or irritation it can make an ex-gratia offer to acknowledge and apologise for it. The maximum payment it can make in such instances is £250. If a person wishes to make a claim for financial losses, there is a separate procedure for this.

32. In its responses to Mr U’s complaint IS addressed his mention of a letter before action and request for compensation. It advised him that a letter before action should be submitted in accordance with Civil Procedure Rules to its legal team. IS also empathetically acknowledged Mr U’s health condition.

33. We are sorry to hear Mr U has a serious lifelong condition that was impacted during what was clearly already a difficult time. It is our view that personal circumstances are beyond the control of public organisations. We do not wish to diminish the impact this had on Mr U. The distress and inconvenience we consider Mr U suffered after IS told him it had misallocated the payment falls within level 2 of our severity of injustice scale. This level includes distress for periods of up to six months. As IS has acknowledged and apologised for its mistake and offered a financial remedy that is in line with our scale and its complaints procedure there is nothing more for it to do in relation to this part of Mr U’s complaint.

Resending payment

34. Mr U says IS blocked a potential remedy in June 2024 when TP offered to resend the payment.

35. IS’ responses to Mr U’s complaint do not address this matter as the complaints were focused on the delay in identifying that the payment had been incorrectly allocated.

36. The examiner (works for IS investigating bankruptcy) did not think it would be appropriate to accept TP’s offer of a repayment whilst they were investigating the missing payment. The examiner noted that Mr U was happy with this at the time, but Mr U disputes this.

37. On 31 January Mr U applied to have the bankruptcy annulled through the courts. During proceedings, having had sight of the communication from the examiner declining the offer of payments, the judge said that it would be for A to consider whether to pursue the promise of payment. The judge did not consider the merits of the examiner’s decision as this is not in their remit. Similarly, IS say any further offer of repayment would be for A to consider.

38. There may be occasions when we decide that there are other reasons why we should not investigate a complaint. Including where an investigation would not be practical, would not reach a satisfactory conclusion and there would be no value in providing that response through an investigation.

39. The issue of further payments being accepted appears to have been a matter for A to determine. Considering this and the opposing views of IS and Mr U on this matter and that it is unlikely there is any more information we could gather which would resolve this point, we cannot take this part of the complaint further. We understand that this will be disappointing for Mr U but hope we have been able to show the thorough consideration we have given the matter.

Evidence

40. Before we decide if we should conduct a detailed investigation of a complaint, we look at whether there are signs the organisation has got something wrong. We do this by comparing what should have happened with what did happen. We have done this and have not found any indications that something has gone wrong with how IS dealt with Mr U request for it to provide evidence it had not received the payment.

41. Mr U says he repeatedly asked IS to provide evidence to show it had not received the payment throughout the complaints process, but it did not do this until July 2025.

42. IS says it could not provide Mr U details of its bank account as these are confidential. It made it clear in its complaint responses that it had not received the payment and asked Mr U to provide evidence of the payments.

43. It is unfortunate the TP was unable to provide information that the payment had left its account.

44. Our principles say public bodies should always deal with people fairly and with respect. They also say in some cases a novel approach will bring a better result or service, and public bodies should be alert to this possibility.

45. We accept IS explanation for not being able to give Mr H evidence due to confidentiality. We can see how the number of payments received by the IS daily and the different dates and amounts provided by Mr U and A would have made it difficult to provide records relevant to his case without compromising confidentiality.

46. We consider IS have treated Mr U, as the person responsible for making the payment, fairly in asking him to provide proof of payment for its investigations. When this was not forthcoming and as Mr U initiated legal proceedings IS took the unusual step of getting an order to access TP’s bank account. It then shared the information with Mr U. We have seen no indication IS could have provided this information sooner nor was it obliged to do so. For this reason, we cannot say anything has gone wrong here.

1. We have carefully considered Mr U’s complaint about IS. We are sorry to hear IS incorrectly allocated a payment to his account. We can see it must have been distressing and inconvenient for Mr U to find this out.

2. We have decided IS has already done enough to put right the impact we consider the misallocation of the payment had on Mr U.

3. We have decided we cannot take Mr U’s complaint about the examiner declining the offer to resend the payment any further.

4. We have seen no indication that anything went seriously wrong with the time it took IS to provide Mr U with evidence that it had not received the payment.