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Are Unemployment Overpayments Dischargeable in Bankruptcy?

What to Do When You Receive Extra Unemployment

Many people understandably assume that whatever they get in unemployment benefits is what they should have received and can safely spend. Unfortunately, the government is liable to make errors from time to time that results in overpayment of unemployment benefits.

If you were receiving these benefits within the past year, you may at times have been provided overpayments. Unfortunately, it doesn’t mean extra money with no strings attached. Whatever you were overpaid in unemployment benefits becomes a debt you must repay, which can be difficult to do if you already used the money.

You will know that the government has overpaid your unemployment benefits by receiving a letter in the mail, often a few weeks after the money was deposited into your account. This can be exceedingly stressful and inconvenient because you may have spent the money on your rent, utility bills, grocery costs, and other essential expenses.

Over time, overpayments that aren’t repaid accumulate as debt, which can put someone in a financially precarious position when they’re already struggling to make ends meet.

For guidance and answers to your questions, reach out to Nguyen Law Group today - free consultations offered.

Are Unemployment Overpayments Dischargeable?

When you have other debts you are struggling to afford, you may be considering your options for debt relief in bankruptcy. Although not all debts can be discharged this way, the good news is that unemployment overpayment can be relieved in bankruptcy.

How Do I Discharge Unemployment Overpayment Debt in Bankruptcy?

Debt incurred as a result of unemployment overpayments can be ejected in bankruptcy, but only if you weren’t responsible for the overpayment. In other words, the reason the overpayment occurred should be because the government made an error in computing your benefits or the vendor processing your payment made an error.

If you were overpaid benefits because you told a falsehood, gave a misstatement, or omitted important information, the debt can’t be ejected in bankruptcy. This can also result in the unemployment office withholding or docking future benefits as a penalty.

In particularly egregious cases, such as those where lying or omitting information was willful and intended to gain benefits, the matter may be criminally investigated as well.

Non-Dischargeable Debts in Bankruptcy

While unemployment overpayment debt can be discharged in bankruptcy, not many people are aware of this fact. They assume that because it’s a debt owed to the government it must be paid one way or another.

This may not be true for unemployment overpayment debt, but it is true for several other debts.

The following kinds of debt can’t be wiped away during bankruptcy:

  • Spousal support
  • Child support
  • Criminal restitution
  • Personal injury award obligations
  • Debts incurred by fraud
  • Debts not listed in the bankruptcy filing

If your financial burden consists of any of these or another non-dischargeable debt, unfortunately, bankruptcy will not work for you. Even so, know that relief is possible when you’re burdened by debt from unemployment overpayments and consumer debt.

If you would like to explore your options in bankruptcy, reach out to Nguyen Law Group for legal assistance. Request a consultation for an opportunity to speak with our attorney about how he may be able to assist you.

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