Name Changed for this. I know it’s easy to say but try not to think the worst. A lot of this comes down to what your intentions were at the time. They know if you genuinely didn’t understand the rules or intended to try and deprive yourself of capital. I had a very similar situation years ago. I genuinely didn’t understand the rules. I thought I could have up to £16k in savings, and you can. But what I didn’t understand was that anything above the first £6k is considered income regardless if it generates an income.
When I first claimed I had just received a settlement from a tribunal and because it was under £10k I thought it was below the threshold. After losing my mum I was left in almost £18k of debt and after a decade of struggling with repayments every month I used the settlement to make an offer which the creditor accepted in order to wipe the debt clean. This was picked up on my credit report and the next thing I knew I was being investigated for benefit fraud.
keep in mind I had only just started claiming UC at the time and a decision maker who frankly should have been sacked decided I owed over £25k that I hadn’t even claimed. I was terrified. I thought I was going to prison for something I knew was not even true. I was so distressed that a staff member at the job centre sent the police to my house because they thought I was going to harm myself. The whole situation was horrific.
They were actually going to set up a payment plan for this imaginary £25k when I insisted on a mandatory reconsideration because it just didn’t make sense. Yes I had received a settlement, but I hadn’t even claimed the amount they were demanding back. A second investigation found out that all I actually owed was £720. Less than a months money at the time. And they were going to make me pay back over £25k I didn’t even owe.
I’ve never had any formal apology for the hell their first decision maker put me through but the upshot was that the law says you can use any capital you have to reduce debt and it is not considered depriving yourself of capital because you are not gaining from it. I hadn’t even done anything wrong by using the settlement to clear my debts in the first place because the law says you can use any capital you have to reduce debts if you are on benefits.
I thought the worst. I was terrified I was going to prison for something I knew I had not done but it turned out I didn’t even owe what they originally claimed, and even then they were still going to arrange a repayment plan so as scary as it is being investigated try not to think the worst. Just be honest about how you got the money, what was going on in your life at the time and why it was given to you.
Offer to repay any over payment and just be honest and explain what was happening at the time and why the money was passed to you. Few people have found themselves in the mess I got in but even that wasn’t the end of the world. They are more interested in career fraudsters rinsing hundreds of thousands out of the system than people making genuine mistakes who want to put it right.