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Can I Discharge Unemployment Overpayments in Bankruptcy?

Occasionally, people who receive unemployment benefits will receive more benefits than they should have received. These are considered overpayments, and unfortunately, they must be repaid.

The problem for many people, however, is that they often don’t realize they received an overpayment until they receive a letter in the mail informing them of the error. This can be weeks after the benefits were paid out and likely used to afford essential expenses.

When someone on unemployment benefits receives an overpayment and can’t immediately repay it, it begins to accrue as debt owed to the government. This can be especially stressful when the individual receiving benefits already has other debts to pay and may be considering bankruptcy for financial relief.

Although many people think that unemployment overpayments can’t be discharged in bankruptcy because they represent debt owed to the government, this actually isn’t correct. Overpayment of unemployment benefits can be discharged in Chapter 7 and Chapter 13 bankruptcy, but under one important circumstance.

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 government’s fault. In other words, the government must be responsible for the overpayment as a result of a staff member’s mistake, a computer error, or another issue that occurred beyond the recipient’s control.

When a recipient of unemployment benefits is responsible for the overpayment, however, this debt can’t 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 didn’t tell the unemployment office about it, any benefits you received may be considered overpayments and can’t be included in a bankruptcy filing. On the other hand, if you received more money than you should have because of an employee’s mistake at the unemployment office, you can eject this debt in bankruptcy.

Non-Dischargeable Debts in Bankruptcy

Although unemployment benefits overpayments can be discharged, there are other forms of debt that can never be discharged. Many people erroneously include unemployment overpayments among these debts, but this simply isn’t the case.

Examples of non-dischargeable debts include the following:

  • Alimony
  • Child support
  • Payroll back taxes
  • Personal injury awards
  • Student loans (in most cases)
  • Money borrowed to pay taxes

If you owe any of these kinds of debts, unfortunately, bankruptcy will not be able to wipe them away. That said, it can be easier to afford non-dischargeable debts by ejecting dischargeable debts through bankruptcy.

If you wish to explore your options in bankruptcy, schedule a consultation with someone who can help from Licata Bankruptcy Firm PC.

Reach out to us online today or call (417) 213-5006.