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Is It Possible To Discharge A Social Security Disability Overpayment In A Bankruptcy?

In the event you are responsible for an overpayment from Social Security disability, there is a possibility that you can use a bankruptcy filing to clear the amount owed. Whether or not you can depends largely on the reason for the overpayment and if the Social Security Administration plans to object to the discharge. 

What Is an Overpayment?

An overpayment occurs when you receive disability payments you were not supposed to. For instance, if you were found to be no longer eligible for benefits, but still received benefits for months before they were discontinued, you would be responsible for paying back the amount you were not entitled to. 

In most cases, overpayments are unintentional on the part of the recipient. However, if you know that you are not supposed to receive the benefits and keep them, this could be considered fraudulent. The same applies if you intentionally lied to receive benefits when you knew that you were ineligible. 

Regardless of the reason for the overpayment, you are usually expected to pay back the funds you received. 

Can the Benefits Be Discharged?

When you file for bankruptcy, some or all of your debts can be discharged by the bankruptcy court. In other words, you will no longer be responsible for them. The overpayment amount can possibly be discharged.

Overpayments are viewed as unsecured debts since there is no collateral attached to them. As such, you can include them in your bankruptcy filing. When the court discharges your other unsecured debts, your overpayment would be included. The government can no longer hold you responsible for paying it. 

There is a major exception of which you should be aware. 

What If the Social Security Administration Objects?

Just like with your other creditors, the Social Security Administration can object to the overpayment being discharged. If the agency objects, a judge will have to consider the objection and could rule that the overpayment stands which means you would have to pay it. 

The agency usually objects if the reason for the overpayment is fraud. If the agency believes that you were aware that you were not supposed to receive the payments, but kept them anyway, this would apply.

The best way to handle overpayments and possible issues that can come up is to talk to a Social Security disability lawyer like Cohen & Siegel LLP who is familiar with the complexities of the law. The lawyer can review the specifics of your case and help you determine what your best options are.