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Can You File Bankruptcy On Unemployment Overpayment

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You Might Not Qualify If You’re Newly Unemployed

Unemployment overpayment relief

Passing the means test can be challenging if you’ve recently lost a high-paying jobat least temporarily. Even if you aren’t earning anything currently, you’ll still have to report the amount you received during the prior six months on the means test, and if the figure is high enough, you’ll fail.

The solution? Wait a few months. If you remain unemployed, your six-month average income will drop quickly. Keep in mind, however, that you’ll have to report any unemployment earnings you receive.

Debts You Can Discharge In Bankruptcy

Your overpayment may be one of many bills you owe. Depending on how much you owe and the likelihood that you can or cannot pay your debts, bankruptcy might be a wise decision. A bankruptcy discharge releases you from personal liability for certain kinds of debts.

  • Secured debts mean theres collateral involved, like your house or car. You either have to pay to keep your home or car or turn them over to the creditor. A Chapter 7 bankruptcy allows you to give up the property. A Chapter 13 bankruptcy could allow you to extend your payment plan by three to five years.
  • Priority unsecured debts lack collateral but must be paid in full during bankruptcy. These include taxes, child support, spousal support/alimony, criminal fines, and personal injury judgments. In Chapter 7 bankruptcy, you sell your assets to pay priority unsecured debts before paying non-priority unsecured debts. If you dont have enough assets to sell and pay off these debts, you might still owe them after completing the bankruptcy process.
  • Non-priority unsecured debts such as medical bills, personal loans, past-due utilities, and credit cards can be discharged in Chapter 7 bankruptcy. For a Chapter 13 bankruptcy, you can pay pennies on the dollar before the remainder is discharged.

Will My Overpayment Of Unemployment Be Covered Under Chapter 7 Or 13

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Recommended Reading: How Do I Check My Unemployment

You Can Negotiate A Payment Plan

If you underreported or failed to report your income or if you are ineligible for a waiver, you may be able to negotiate a payment plan with the state. An attorney can help you work out the details, terms, and conditions. The state is usually willing to negotiate a payment plan, provided you can show you have the funds to make regular installments on your debt.

Can You File Bankruptcy On Overpayment Of State Benefits

Discharging Unemployment Overpayments in Bankruptcy

Submitted by the Bond & Botes Law Offices – Friday, July 11, 2014

In most cases, yes, you can file bankruptcy on overpayment of certain State benefits. There are two instances where we see this most often. One is with State Department of Labor Unemployment Overcompensation and the other is Department of Human Resources Food stamp overpayment. These overpayments generally happen due to an innocent delay in reporting a change in the recipients status or a delay in processing paperwork involved with that change in status.

There are some circumstances where these debts may not be dischargeable. This occurs when the applicable State department has charged you with fraudulently obtaining any of these types of benefits. If there is a fraud charge involved you cannot discharge this debt in bankruptcy, and can even be subject to arrest. Therefore, if you are a recipient of these types of benefits, it is a very good idea to report a change in your eligibility status immediately.

Most of these overpayments we see are not fraud and can be included in either a chapter 7 or chapter 13 bankruptcy. This may also vary from state to state depending upon your states policies regarding the recoupment of these overpayment benefits.

If you are struggling with this type of debt or suffering any financial strain at all, please contact our office nearest you and schedule a free consultation with an attorney to discuss your financial issues.

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Look Into Your State’s Overpayment Collection Process And Try To Negotiate A Payment Plan

Each state also has a different process for how it collects those overpayments. Some will choose to garnish them from your additional unemployment checks over a certain period of time. Illinois, for example, gives some individuals an option to let the state keep up to 25 percent of any future unemployment benefits until the overpayment balance is recouped in full.

Other states, including North Carolina, let claimants pay those filings through credit or debit card, as well as a check or money order. That also includes garnishing your federal and state tax refund and lottery winnings. Most of the time, the amount is too small for prosecution, Evermore says.

States also typically let you negotiate a repayment plan. It’s worth a shot to see if you can avoid paying back that balance if you’re still facing job loss or a severe income disruption.

Social Security Overpayment And Bankruptcy

SSI overpayment- Can I discharge by filing bankruptcy?Supplemental Security Income Why do I have an SSI overpayment?

  • Your income is higher than you estimated.
  • Your living situation has changed.
  • Your marital status has changed.
  • You have more resources than the allowable limit.
  • You are no longer disabled and you continue to receive disability payments.
  • You do not report a change in your income as required by the SSA.
  • The Social Security Administration miscalculated your payment information because incorrect or incomplete information was given to them.
  • Filing Bankruptcy for an overpaymentHiring a bankruptcy lawyer

    Read Also: How Do I Collect Unemployment

    I Owe Minnesota Unemployment Compensation For An Overpayment Can Bankruptcy Help

    Sometimes an unemployment overpayment will go away in bankruptcy, but usually it survives.; Whether it goes away or not depends on whether the overpayment .; Chapter 13 Bankruptcy will also stop garnishment for unemployment for up to 5 even if the overpayment doesnt get discharged in the bankruptcy.; This is because bankruptcy gives you an automatic stay that prevents any act to collect a debt.; This automatic stay even prevents student loans from garnishing your pay, so it works on all types of debts and attempts to collect debts.

    HOW DO OVERPAYMENTS OF UNEMPLOYMENT COMPENSATION HAPPEN?

    Sometimes the MN unemployment compensation office, called the Department of Employment and Economic Development , gives people money and then later decides that the money should never have been paid in the first place.; If this happens, then the DEED will decide that you owe that money to the DEED as an overpayment.; There is a penalty for it, and the interest on the balance increases very quickly.

    2 REASONS WHY PEOPLE GET UNEMPLOYMENT OVERPAYMENTS IN MINNESOTA

    1) They kept getting paid unemployment compensation even after starting a new job.; In Minnesota, you must claim unemployment benefits every week and tell the DEED how many hours you worked, if any, for the week.; Sometimes people say that they didnt work any hours when they actually did work some hours.; If you owe an overpayment for this reason, then it will not be discharged in bankruptcy.

    Keeping Track Of Your Unemployment Benefits

    Can You File For Bankruptcy If You’re Unemployed?

    Itâs a good idea to keep track of all the paperwork associated with your unemployment benefits. Take screenshots of online documentation. Keep receipts for the unemployment you receive. Make sure you know how much you are entitled to receive. If you are receiving more than you are supposed to receive, you will be required to return the overpayment. So, it is smart not to spend that money.

    Itâs a good idea to put the overpayment in a separate bank account to keep yourself from spending it. If there is an error, you can contact the unemployment office. You can also ask your state-elected officials for help. It is their job to make sure their constituents receive the government benefits theyâre eligible for. You can also contact a private attorney for help.

    Also Check: How To Contact Unemployment Office

    How Is The Debt Repaid

    In most cases, the state allows debtors to make payments on their debt. However, many people are unaware that they owe the debt in the first place. In addition, challenging financial times make it even harder for people to find additional funds to repay a debt they did not realize they had incurred.

    One possible path forward is to ask for a waiver. If you believe that the debt is inaccurate, or the overpayment was due to an error, it may be possible to have the debt waived. You can also file an appeal with the state and present evidence supporting your claims in an informal hearing with a judge.

    Overpayment Of Government Benefits

    Receiving demand letters from a government agency for overpayment of benefits & penalties? We can eliminate or consolidate your debt to improve your credit.

    What is happens if you are paid unemployment compensation only to later have the claim overturned? ;What if you received workers compensation until your employer fought it and won? ;If you are now getting demand letters for Social Security Administration, Unemployment Agency or other government entity regarding overpayment of benefits, we are here to help.

    Besides filing an appeal to plead your case in front of a judge, the only legal way to resolve debts resulting from overpayment of government benefits is to file a personal bankruptcy. While this may seem daunting, you may be surprised to learn the many benefits to your budget and credit that this options offers.

    Our firm specializes in helping Michigan residents find lasting debt relief and financial peace-of-mind. Call us today at 866-261-8282 for a free consultation to understand how to bring swift resolution to government demand letters and other debts that may be impeding your budget and credit. We have;seven Michigan office locations, conveniently located in: Detroit, Southfield, Warren, Dearborn, Ann Arbor,;Lansing and Flint.

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    Can I Keep My Property In Chapter 7

    By and large, most Chapter 7 bankruptcy filers keep all of their property and lose nothing. An experienced Bankruptcy Attorney will be able to advise you about the exemption laws in your jurisdiction and help you determine if anything you own or have an interest in might be at risk.

    Keep in mind that outside of bankruptcy you can lose property to creditors. Prior to filing bankruptcy, creditors can continue collecting several ways. For example, creditors and debt collectors may take money out of your bank account, garnish wages and even attach liens to your property. But, all payments and collections stop upon filing bankruptcy.

    You’ll Need Some Type Of Income To Qualify For Chapter 13

    Can I File For Unemployment If I Owe Overpayment

    You can still file for Chapter 13 bankruptcy if you’re unemployed. However, if you don’t have employment income, you’ll have to show that you have some kind of income from a verifiable source and that you can afford your plan. Otherwise, the court will dismiss your case.

    For instance, an unemployed debtor might have business or rental income that can be used to fund a plan. You can even use unemployment benefits, Social Security funds, or retirement benefits. As long as you can show that you have enough income coming in from some source, then your case will likely get approved by the court.

    Read Also: Is The 600 Unemployment Taxable

    Chapter 7 Vs Chapter 13

    In general, Chapter 7 bankruptcy is a faster process than Chapter 13 bankruptcy. Chapter 7 bankruptcy in San Diego will usually discharge within three months from filing. Typically, the case is closed shortly after entry of the discharge order. An individual or business can file Chapter 7 whereas only individuals can file Chapter 13.

    But Chapter 13 comes with many benefits including the opportunity to repay mortgage arrears overtime, lower vehicle payments, reduce interest and avoid unsecured voluntary property liens. With the guidance of an experienced bankruptcy attorney from San Diego, you get out of debt and start fresh!

    Can You Discharge Edd Unemployment Overpayments In Bankruptcy

    Not all debts are dischargeable in bankruptcy.

    It would be nice for my clients if they were, but there are limits.

    See my page on debt discharge in bankruptcy for more information.

    One type of debt that for some reason arises with relative frequency is overpayments made for unemployment.

    In California these payments are made by the Employment Development Department .

    There are different ways this debt can arise, but essentially what happens is the government pays you more than you are entitled to under the law. ;You are then obligated to repay that overpayment.

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    Employment Status When Filing For Bankruptcy

    Chapter 7 and Chapter 13 each offer unique benefits to filers. The first allows filers to cancel debt quickly while the second lets people keep property in exchange for paying into a payment plan.

    Because each chapter has different qualification standards, how your unemployment will affect your bankruptcy will depend on some of the following factors:

    • how long you’ve been unemployed
    • how much you made at your prior place of employment
    • whether you’ll start another job soon
    • whether you have another source of income, and
    • whether you plan to file for Chapter 7 or Chapter 13 bankruptcy.

    You Might Not Qualify If You Get A New Job

    Should an Unemployed Person File for Bankruptcy

    You could run into a problem if you find a job during your Chapter 7 case because the court looks at more than just the means test. It will also consider how much you have left over after you pay your bills each month. The court does this by deducting the reported monthly expenses on Schedule J: Your Expenses from your actual monthly income you report on Schedule I: Your Income.

    So, if you land a new job with a hefty salary and your expenses are low, you could end up with a substantial amount of discretionary income each month. In that case, the bankruptcy trustee assigned to your matter might recommend that the court convert your Chapter 7 to a Chapter 13.

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    Bankruptcy Law And Overpaid Unemployment Benefits

    Nothing in bankruptcy law exempts overpayments from discharge. The court treats an overpayment like any other debt, which means its possible to get this debt discharged in Chapter 7 or Chapter 13 bankruptcy provided you did not commit fraud or another unlawful act.

    A discharged overpayment could affect future unemployment benefits, though. If Ohio does not require you to repay excess unemployment benefits, it could deduct them from future benefits.

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    Read Also: How Do I Collect My Unemployment

    How Do You Apply For Ui Benefits

    To receive UI benefits, youâll need to file an unemployment claim with the unemployment insurance division of your stateâs department of labor. Each state has an unemployment program. Each state has its own rules about how much unemployment benefits a worker is eligible for, how long the benefits last, and whether the worker is eligible to apply for benefits.

    The state government pays the UI benefits to the unemployed workers. The recipient of UI benefits is called a claimant. Typically, claimants are required to have worked for a certain length of time and to have earned a certain wage before they are eligible to receive UI benefits.

    Claimants are required to do certain things to keep receiving their benefits. They usually need to certify that they have been job hunting while they are receiving UI benefits. Many of these requirements were placed on hold during the COVID-19 pandemic. Typically, claimants who remain unemployed are granted UI benefits for 26 weeks. This eligibility period was extended during the coronavirus pandemic.

    After you apply for unemployment benefits, you will be notified of the full amount of unemployment benefits you can receive. Typically, the benefit amount is paid to you in weekly benefit payments. The benefit amount is based upon a percentage of your earnings. If you receive Social Security, this might affect the amount of UI benefits you will be entitled to receive.

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