The government will face a second legal challenge to its controversial welfare debt recovery scheme after the Department of Human Services wiped the robodebt at the centre of the first case.

Guardian Australia revealed in May that the debt of a Melbourne nurse, Madeleine Masterston, had been wiped before proceedings in the federal court. The judge is yet to determine whether the challenge will proceed but the department has argued it no longer has a case to answer.

On Wednesday Victoria Legal Aid said it would mount a new challenge on behalf of a 33-year-old local government employee, Deanna Amato, who was sent a $2,700 robodebt over alleged Austudy overpayments. Her $1,700 tax return was garnished by the government over the debt.

“In this case and the case of our other client Madeleine, we think it’s critical for a court to look at the process Centrelink relies on to decide that people owe them money,” said Rowan McRae, an executive director at Victoria Legal Aid.

“These two women are asking the court to decide whether that process complies with the law.”

In the face of sustained criticism, the government has taken a number of steps to blunt the harshest aspects of the scheme, including allowing people more time to prove their past income before the department uses a controversial “averaging” tool.

The averaging method spreads a person’s annual income gathered from tax office data over 26 fortnights to calculate to whether they were overpaid, which often results in incorrect debts being raised.

But employees have told Guardian Australia that under-pressure staff are routinely proceeding straight to the averaging method to raise a debt to try to meet informal team targets. The department denies this.

Amid those changes, the government has also ramped up the scheme. It is on track to issue more than 200,000 debts this financial year and has raised about $555m, about 30% more than it did in previous years.

After news of the ramp-up, the Greens senator Rachel Siewert called on the new minister, Stuart Robert, to suspend the scheme.

“It’s shameful to be putting people on the lowest income through the stress and anxiety of the robodebt scheme, which is fundamentally flawed,” she said late last month. “It’s also far too convenient that the person at the centre of a federal court challenge to robodebt had their debt wiped.”

Victoria Legal Aid has argued in court that the department had acted in “bad faith” by wiping the debt and that it held a “forensic advantage” because it could wipe the debt and then say it had no case to answer.

A date has not been set for Amato’s case, while Masterston’s will be heard again in August.

A Department of Human Services spokesman, Hank Jongen, said: “It would be inappropriate for us to discuss the details of a matter that is presently before the court.

“The commonwealth ombudsman, in reviewing our processes, found that it is reasonable and appropriate to ask people to explain discrepancies in data.”