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You Can Discharge Social Security Overpayments in Bankruptcy

Posted on Friday (June 15, 2012) at 1:00 pm to Bankruptcy Tips Consumers Should Know
Benefits of Bankruptcy
Chapter 7 Bankruptcy
Tax and Bankruptcy Issues

ssa pic 270x270 You Can Discharge Social Security Overpayments in BankruptcyWritten by Craig D. Robins, Esq.
 
There are many types of debts that can be discharged in a Chapter 7 bankruptcy filing.  Most consumers seek to discharge credit cards debts, medical bills, loans, etc.  Some consumers have the Social Security Administration (SSA) chasing them down as well.
 
This is because the SSA, after they paid benefits to a particular consumer, determined that they paid too much for one reason or another, and they demanded the consumer to pay the overpayment back.  What happens most frequently is that the applicant, who was receiving Social Security benefits, goes back to work but the SSA continues to make payments.
 
When the SSA learns that there has been an overpayment, it makes a demand that the overpayment be repaid within 30 days.  These overpayments can add up to a sizable amount.  Can this type of obligation be discharged in a bankruptcy filing?
 
Yes.  In general, Social Security overpayments can be eliminated by filing for Chapter 7 bankruptcy.  They can be treated as typical unsecured debt in Chapter 13.
  
Although claims owed to some governmental entities are entitled to special treatment in a bankruptcy filing, the Social Security Administration is not.  They are treated like any other general unsecured creditor.  That means that a consumer seeking Chapter 7 relief can discharge a debt owed to the SSA.
 
However, all creditors have the ability to challenge discharge if it appears that the debtor incurred the debt through fraud or fraudulent pretenses.  The SSA technically has the right to object to discharge if it appears that the debtor knew or should have known that he or she was not entitled to the Social Security benefits.
 
That being said, I have never seen an instance of the SSA challenging discharge in my 25+ years of practicing consumer bankruptcy on Long Island.  Nevertheless, it would be wise to consult with an experience bankruptcy attorney if you owe Social Security debt.
 
Once a bankruptcy petition is filed, the SSA must immediately stop all proceedings to collect the overpayment.  Not only is this statutory bankruptcy law, it is also SSA policy on bankruptcy filings.
 
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