Bankruptcy Can Discharge Overpayment of Unemployment and Social Security
Bankruptcy can discharge overpayment of unemployment and Social Security benefits. Like any other unsecured debt, such benefit overpayments are legally binding. But as with most other legally binding debts, bankruptcy can discharge them. There is no special provision in the law that denies the dischargeability of these debts. So if you are overpaid unemployment from the California Employment Development Department (EDD), or benefits from the Social Security Administration (SSA), you can eliminate these debts through bankruptcy.
It is common for people to be overpaid by the EDD and SSA for unemployment and other benefits. Millions of people file for and receive such benefits. Instruction and oversight covering the application for these benefits, though, is slight. Sometimes the money paid does not match the benefits earned. When the EDD or SSA finds out, debt can result. The EDD even has a link on their website concerning overpayments. But again, bankruptcy can discharge the overpayment of unemployment and Social Security Benefits.
The only limitation to bankruptcy being able discharge overpayment of unemployment and Social Security benefits is fraud. If excess benefits are obtained from false information, bankruptcy will not help. Understandably, only overpayment resulting from mistake or innocent error can be dealt with through bankruptcy. The glitch that gave rise to the overpayment must be a mistake. Nothing more. The mistake can be either on your part or the government’s. Whatever way, so long as there is no fraud, overpayment is dischargeable in bankruptcy.
If overpayment of unemployment or Social Security benefits is not discharged in bankruptcy, it must be paid. Unlike most other forms of debt, it can be collected quickly, without the need of a lawsuit. If the government overpays you, they can get it back without having to sue you. Your wages can be withheld (garnished), your tax refund tapped, or a host of other collection tools applied by the government to get their money. Since bankruptcy can discharge overpayment of unemployment and social security benefits, many choose this route.
If the government has already begun collecting for benefit overpayment, it’s not too late to file bankruptcy. Bankruptcy will still allow you to discharge those debts even if the government has already started to collect. If you want to stop your wages from being garnished or your tax refund from being intercepted, file for bankruptcy.