The Reason For The Overpayment Matters
Bankruptcy filers can include their unemployment overpayment debt and expect a discharge, but the reason for the overpayment must be the governments fault. In other words, the government must be responsible for the overpayment as a result of a staff members mistake, a computer error, or another issue that occurred beyond the recipients control.
When a recipient of unemployment benefits is responsible for the overpayment, however, this debt cant be ejected in bankruptcy. Usually, recipients are considered responsible for the overpayment when they make a false statement, misrepresentation, or omission of information that results in the overpayment.
For example: If you got a new job or earned money and didnt tell the unemployment office about it, any benefits you received may be considered overpayments and cant be included in a bankruptcy filing. On the other hand, if you received more money than you should have because of an employees mistake at the unemployment office, you can eject this debt in bankruptcy.
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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Social Security And Bankruptcy
Another complication to filing personal bankruptcy, is that social security benefits are generally not included in the means test.
But some bankruptcy courts have held that unemployment compensation is a form of social security because under federal law unemployment compensation is funded through Social Security.
Again, like Connecticut, all states have made different decisions on this issue. Whether your jurisdiction views unemployment compensation as income or not, may make a difference in your ability to file Chapter 7 bankruptcy.
Either way, you are required to list unemployment compensation as part of your monthly income.
You may list it as a social security benefit and hope that it is excluded, but the Bankruptcy Trustee in your jurisdiction may disagree and include it.
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Discharging Unemployment Overpayments In Bankruptcy
In bankruptcy generally you can discharge the unemployment overpayments. Unemployment benefits or EDD overpayments are treated like any other debt in bankruptcy. They are not given special protections, even if they are owed to the state. Section 523 of the bankruptcy code lists those debts that are non-dischargeable in bankruptcy. An unemployment overpayment is not a debt that is listed as exempt from discharge. It is subject to discharge in a Chapter 7 and Chapter 13 bankruptcy. Filing for bankruptcy can provide significant relief from the collection efforts of the state. The automatic stay will help stop collection efforts from the state to pay back the unemployment benefits.
Unemployment benefits only pay a portion of the normal wages that individuals received from their previous employment. Unemployment benefits are generally paid based on calculations from your previous earnings. In California unemployment benefits are calculated based on a specific 12-month period. Overpayments in unemployment can result from a number of reason including incorrect calculations, payments issued for period in which the claimant did not qualify for benefits or reporting false information.
Can You Always Discharge Unemployment Overpayments?
The simple answer is no. If you obtained an unemployment or EDD overpayment as a result of fraud, then it may not be subject to discharge in bankruptcy. Section 523 of the bankruptcy code makes the following debts non-dischargeable.
Can You Eliminate Unemployment Overpayment Debt
What Is Overpayment of Benefits?
As a general rule, the Bankruptcy Code permits the discharge of unemployment overpayments when you file for bankruptcy. These payments are usually treated as an unsecured debt and are dischargeable. This is the case whether you file for protection under Chapter 7 bankruptcy or under Chapter 13 bankruptcy. The Commonwealth of Pennsylvania debt for the unemployment overpayment will be treated the same as all other general unsecured creditors that you list in the Bankruptcy Petition. If you file for bankruptcy protection, the automatic stay will stop collection activities by the state to collect for the overpayments that you were paid. If overpayment of benefits has occurred, you will receive an overpayment determination by mail.
Under Section 501 of the Pennsylvania Unemployment Compensation Law, a determination becomes final unless an appeal is filed timely. For an appeal to be considered timely, it must be filed within 15 days of the mailing date of the determination.
The above is the general rule but there are exceptions. The big exception is fraud. If you commit fraud then Title 11 Section 523 of the U.S. Bankruptcy Code provides that any debt incurred through fraud is not dischargeable.
Fault Overpayment
If you receive benefits that you are not entitled to because of your actions, such as withholding materials or providing fraudulent information, you must repay a fault overpayment.
How Can Unemployment Overpayments Happen?
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Receiving Both Unemployment Benefits And Social Security
In most states today, workers can collect unemployment insurance benefits at the same time that they are drawing Social Security. It wasnt always this way, though. In the early 2000s, 20 states plus the District of Columbia had rules stating that if you received both benefits at the same time, then you would have to partially offset your unemployment benefits by as much as 50%. After Illinois repealed this requirement in 2015, Minnesota became the only state left with this provision.
Minnesotaâs offset law currently stipulates that only some residents must reduce their unemployment insurance benefits by up to 50% of their Social Security benefits. The key factors that determine whether this is necessary are the date that the resident began collecting Social Security and the length of time between that date and the date they began collecting unemployment benefits. The Minnesota Department of Revenue website has more information on this.
How Does Top Work
If you owe a debt to DWD and that debt is eligible for collection through the Treasury Offset Program , DWD will send you a Notice of Intent to Offset Federal Income Tax Refund letter. You have 60 days from the date on that letter to either repay the debt in full or submit evidence to DWD proving that you have already paid your debt or that your debt is part of a bankruptcy proceeding.
If any part of your debt, including accruing interest, is still eligible for collection through TOP after the 60-day period expires, DWD will send your debt to the TOP database for collection. Before you receive a federal income tax refund, the Bureau of Fiscal Services, , will review the TOP database to see if you owe a debt. If your debt is in the database, all or a portion of your federal income tax refund will be held and sent to DWD to satisfy all or a portion of your debt. When this happens, BFS will send you a letter notifying you of the amount of the offset, the agency where the offset was sent, and the contact information for that agency.
Your debt, including accruing interest, will remain in the TOP database and will continue to be offset by federal income tax refund payments until your debt to DWD is paid in full.
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Getting Started With Bankruptcy
Rosenblums advice deserves repeating. Bankruptcy isnt a fender bender easily resolved with an accident report and a call to the insurance agency.
Its also nothing to rush into without first exhausting other avenues of debt relief, including debt management programs. A DMP is a strategic plan to eliminate unsecured debt such as credit cards and medical bills.
Understanding the pros and cons of specific debt relief strategies may help you solve debt issues without the short-term and long-term challenges of filing bankruptcy.
The reason bankruptcy is likened to a lifeline, after all, is that usually time is running out and the waters are getting choppier for those already swimming in so much debt they cant see their way clear.
If thats you and a consultation with an experienced bankruptcy attorney confirms it the next step is understanding the impact of bankruptcy.
Beyond the critical questions about the security of home, car and other assets in a bankruptcy, theres the damage to your credit score.
A Chapter 7 bankruptcy filing impacts your credit report for 10 years. In Chapter 13, its seven years, but smart debt management can help you rebuild your credit while waiting for the bankruptcy filing to be cleared from your report.
Whether you hire an attorney or try to file bankruptcy on your own, there are filing fees involved. Youre basically paying the court for its trouble, and the cost of bankruptcy isnt cheap.
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Filing Bankruptcy Due To Unemployment Or Disability
If you are or have been unemployed, underemployed, or on disability, bankruptcy could be of significant relief to you. Bills of all types go unpaid when not enough money comes in and at some point, something must be done to help you recover.
Bankruptcy is a way for you to take care of the old bills so that you can focus on the future and provide for yourself and your household anew. Being unemployed and having employment that is inadequate can be demoralizing and lead to a feeling of hopelessness. However, bankruptcy can be a very powerful tool to help you put the past behind you and it is generally a much better idea to file a case before you become fully employed again. Frequently, people wait until they have a regular income again before considering bankruptcy and that can make getting a case approved much more difficult.
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Can You File For Bankruptcy While Unemployed
Because unemployment is one of the most common reasons for financial struggles, you absolutely can file for bankruptcy if you don’t have a job.
Whether you are receiving unemployment benefits when you go through bankruptcy will likely affect whether you can seek a Chapter 7 or Chapter 13 filing and how much money you will owe on your debts.
Talking to an experienced bankruptcy attorney as early in the process as possible will put you in the best position for a successful resolution. A bankruptcy attorney will be familiar with federal and your state’s bankruptcy laws and the best course of action for you to take.
Whom Should I Contact Regarding The Offset
If you have questions about the Treasury Offset Program, offsets, or a notice you received from the Bureau of Fiscal Services, , you may contact the Treasury Offset Program Call Center at 1-800-304-3107. Many state and federal agencies offset debts through TOP. The notice you receive from the Bureau of Fiscal Services, will list the name of the agency or agencies that requested offsets from your federal income tax refund, along with contact information for those agencies.
For questions about a debt that you owe to DWD, contact the Benefit Collections Unit at 1-800-262-6949.
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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 Unemployment Overpayment Debt Be Discharged In Bankruptcy
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Yes, it will likely be discharged like any other unsecured debt, absent a showing of fraud. Therefore, if it was a clerical error on the part of California EDD,
However, one thing to be careful about is the equitable right of recoupment.
What is RECOUPMENT and how does it apply to employment overpayment?
In English it means that if Ann has to repay Betty $200, Betty then breaks Anns bike costing $50, Ann can repay $50 less to Betty, or $150, based on the concept of Recoupment. It doesnt make sense for Ann to have to pay $200 to Betty and then for Betty to repay Ann $50.
Similarly, there is a concern that while this overpayment owed to California is discharged in bankruptcy, if the unemployment benefits are still being paid to the debtor, California EDD can argue that this is not collection, but is rather Recoupment, which unlike other collections doesnt violate the Discharge Order or Automatic Stay, because the bankruptcy estate is subject to these equitable recoupment rights.
The law is clear that if the Debtor is receiving the unemployment payments reduced due to the overpayment, such reduction can continue through the bankruptcy if the overpayment debt and the claim for unemployment is a result of one transaction.
Exception to discharge of overpayment of unemployment benefits Fraud
In summary:
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Can You File Bankruptcy On A Unemployment Overpayment Charge Even With Penalities
- Posted on May 10, 2012
As long as this is not fraud, it can be discharged in any case. If you are sued for fraud, you need to respond to fight any charge, because fraud is not discharged.
Mr. Goldstein is a Virginia-licensed attorney only. The information is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. Answering this question does not in any way constitute legal representation. Contacting Mitchell Goldstein or the Goldstein Law Group does not constitute legal representation, nor is any information you provide protected by attorney-client privilege until otherwise advised.
Overpayment Of Unemployment Insurance Benefits
You typically must repay an overpayment of unemployment benefits within 60 days. Otherwise, the overage is reported to the Ohio Attorney General for collection. Overpayments happen because of unreported or underreported wages. They also occur through no fault of your own, usually by a clerical error.
However, the coronavirus pandemic has created a wave of potential unemployment benefits. Bankruptcy may or may not be the best decision for you right now. You still have a few options when it comes to the overpayment of unemployment insurance benefits.
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Federal Tax Liens And Bankruptcy
A federal tax lien is a government sanction. Its a legal claim against your property when you fail to pay a tax debt, protecting the governments interest in personal property, real estate and financial assets.
The federal tax lien can be discharged from the person, but not from the property, said Jasmine DiLucci, Principal at DiLucci CPA Firm and JD Tax Law. Due to bankruptcy, the IRS wont be able to pursue you for any additional amount above and beyond the value of the property.
Even under circumstances where your tax debts qualify for being discharged in a Chapter 7 filing, that wont change the status of a prior recorded tax lien. It doesnt go away.
You can continue to live in a house with a lien on it, but you cant sell that property without first paying off the lien.
Tax liens are not typically wiped away with filing bankruptcy, Martin said.
A lawyer may be able to get a lien removed if there was an error in the filing of it or if the lien is at least 10 years old.
But again, dont count on it.
Conditions For Discharging Tax Debt
The first requirement for dischargeable tax debt is that it be income tax debt, specifically. This would include unpaid federal and state income taxes but not, for example, back payroll taxes such as withholding for Social Security and Medicare.
A second condition is that the tax debt cant be too freshgenerally, newer than three years. To be more precise, the original tax return must have been due at least three years before the date of the bankruptcy filing.
Next, you must have filed a valid tax return for the debt at least two years before filing for bankruptcy. And the return must have been submitted on time. If you requested and received extensions and filed by the extension date, thats considered on time. If you filed after the extension date, the return might not be considered valid and the tax debt wont be dischargeable.
In addition to rules about age of the debt and timing of the return, theres a requirement that the IRS must have assessed the debtin other words, recorded it on the agencys booksat least 240 days before the bankruptcy filing. This requirement may also be satisfied if the IRS has not assessed the debt yet.
If the IRS did assess the debt and then stopped collection due to a previous bankruptcy filing or other cause, the usual 240-day time frame could be extended, potentially making it tougher to discharge the debt.
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