Social Security benefits are a crucial resource for many people, keeping families in their homes and putting food on the table. But the Social Security Administration does make mistakes, and overpayments happen. When you owe a substantial amount in overpayments, you may wonder if that amount can be discharged in bankruptcy or if you will be on the hook for it for the rest of your life.
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How Social Security Overpayments Happen
With how rigorously the SSA processes applications and payments, it seems like overpayments shouldn’t occur. However, they are fairly common. If your information was entered incorrectly by the SSA, you may receive benefits you aren’t entitled to or get more than you rightfully should. You may also receive benefits after you return to work or otherwise bring in income.
If you appeal a decision, receive benefits during the appeal, and lose your appeal, you will also have to repay those overpayments. In some cases, the recipient does notify the SSA of their return to work but still receives benefits through a mistake on the part of the SSA.
Some Government Debts Cannot Be Discharged
Why is this such a big concern for so many people? The government doesn’t easily forget about the money it’s owed—just look at what happens if you forget to pay your tax bill or skip out on your taxes entirely. Recently unpaid taxes, criminal fines, and other debts you owe to the government cannot be discharged during bankruptcy. Many people assume that SSDI and SSI overpayments fall into the same category.
How Social Security Overpayments Are Treated in Bankruptcy
Luckily, SSI and SSDI overpayments do not fall in the same category as criminal fines, unpaid taxes, and other non-dischargeable debts. Instead, they are considered to be unsecured debts. In that way, they are similar to medical bills, credit card debt, and unpaid personal loans. If you are granted a discharge during bankruptcy, your Social Security overpayments will also be discharged.
This is a huge relief for many who file for bankruptcy. Those who receive disability benefits are often living on very little money, and the thought of having to repay hundreds or even thousands of dollars can be overwhelming. For those receiving SSDI, the benefits they receive may mean the difference between taking care of your family and skipping bills to make ends meet. If you add unexpected debt payments on top of that, the situation often becomes nearly impossible to resolve.
Will the SSA Fight Your Bankruptcy?
The SSA, then, is just like any other creditor in your bankruptcy. If your medical creditor or credit card company believes that you committed fraud, they can dispute your bankruptcy and ask to have their debt declared non-dischargeable. This is difficult to do, as companies generally have to put substantial resources into proving fraud. Most do not even try.
The SSA also has this opportunity. If they believe you engaged in fraud to receive benefits, they can ask to have their debt excluded from your bankruptcy. They may do this if you knowingly took benefits that you were not entitled to or applied for benefits with knowingly false information. Again, though, this takes a substantial amount of work and time, and the SSA is a very busy agency. Chances are very low that they will attempt to fight the bankruptcy discharge.
If you owe a large Social Security overpayment and you’re not sure what to do about it, it may be a good time to talk to a bankruptcy lawyer. One large overpayment can put you in debt to the Social Security Administration for years, leaving you without enough money to meet your other financial obligations. In this type of situation, bankruptcy may be the right option for you.
Find Out How Padgett & Robertson Can Help You
Are you considering bankruptcy? Set aside some time to meet with our team of bankruptcy attorneys and figure out what your next steps are. While bankruptcy may seem complicated, we are here to demystify the process and help you understand exactly what is expected of you. Get started now by contacting us online or calling us at 251-342