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Social Security Overpayments Bankruptcy

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Social Security Overpayments are Dischargeable in Bankruptcy

Can I Wipe Out a Social Security Overpayment by Filing Bankruptcy?

In short – Yes. If the Social Security Administration (SSA) pays you retirement or disability benefits more than you were entitled to receive, then they may can come after you to collect the overpayment. The Social Security overpayment is a debt you have to pay back unless you file bankruptcy.  But like most debts, absent fraud, Social Security overpayments are typically dischargeable in bankruptcy. Read on to learn more about whether you can discharge Social Security overpayments in bankruptcy.

What Is a Social Security Overpayment?

Social Security overpayments are common.  They usually result because people lose their eligibility for disability benefits. A typical situation is when someone receiving benefits gets well enough to return to work but still continues to receive checks from the SSA.

Usually, people are not aware that they are being overpaid. Most people promptly notify the SSA when they return to work or experience a change that may affect their Social Security benefits. However, if payments continue, they incorrectly believe that they still are eligible to receive benefits. As a result, most people are shocked when they receive a letter from the SSA demanding repayment of the overpaid amount – which can be substantial.

Social Security Overpayments Can Be Discharged in Bankruptcy

Just because you owe a debt to the federal government does not mean that you can’t discharge it in bankruptcy. Some debts owed to the government, such as taxes or criminal fines cannot be included in bankruptcy and are what is called “nondischargeable”.  However, Social Security overpayment is not one of them.

In bankruptcy, Social Security overpayments are treated as general unsecured debts similar to credit card debt and medical bills. So, if you are unable to pay back your Social Security overpayment, filing for bankruptcy, chapter 7 or chapter 13, will allow you to discharge your debt to the SSA. There is one catch however. If the SSA believes you were committing fraud by accepting the additional payments they are allowed to file a complaint in bankruptcy court to have the debt declared nondischargeable due to fraud.

The SSA Can Object to the Dischargeability of Your Overpayments if You Commit Fraud

Debts acquired by false pretenses or other fraudulent means can’t be discharged in bankruptcy. If the SSA believes that you committed fraud by continuing to receive benefits, it can file a complaint (called an adversary proceeding) in your bankruptcy to have the debt declared nondischargeable.

However, fraud is typically difficult to prove in bankruptcy court. So the chances that the SSA will object to the dischargeability of your social security disability benefits overpayments is slim. However, if the SSA believes you accepted payments knowing that you were not entitled to them, it may have more incentive to file an adversary proceeding.

If you received a large Social Security overpayment and are not able to pay it back, you should contact an experienced bankruptcy attorney to discuss all of your options with Brad.


by Bradley Covey

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About Bradley Covey

Bradley Covey is an Illinois bankruptcy attorney helping individuals and businesses file Chapter 7 bankruptcy and Chapter 13 bankruptcy in Kane County, DuPage County, Kendall County and Will County, Illinois. Brad attended SIU undergrad and NIU College of Law. Brad served in the military at Ft. Stewart, Georgia and Ft. Sill, Ok as a Field Artillery Officer. Brad later served in the Illinois National Guard as a Major.

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