Overpayments of Social Security benefits are unsecured debts just like credit cards and medical bills, and they are therefore dischargeable in Chapter 7 and Chapter 13 bankruptcy in most cases, short of any finding of fraudulence in the acceptance of the payment by the recipient. In other words, so long as you did not accept the payments knowing that you were not entitled to it—or knowing that you were about to file for bankruptcy—the overpayment amount can be discharged in a Chapter 7 or Chapter 13 bankruptcy.
Simply because the claim for the debt is held by a governmental agency does not mean that the debt cannot be discharged. Even IRS or Michigan state or other state tax debts can be discharged in bankruptcy, under certain, very specific circumstances. Bankruptcy is itself a function of Federal law and, therfore, the mere fact that a debt originates with a Federal agency does not tell the tale. All debt claims are subject to the sweeping effects of bankruptcy, regardless of point of origination.
The primary question with Social Security overpayment (as well as tax debt) dischargeability is, as noted above, the question of fraud. Fraud is the primary ground in bankruptcy for a finding of a lack of dischargeability (i.e., the bankruptcy will not discharge the debt) for any debt and particularly so for Social Security, tax, and other debts of governmental origin.
Every case must be examined thoroughly on its own facts, in other words, to ensure that the debt can properly be discharged by a Chapter 7 or Chapter 13 bankruptcy. There are few, if any, genuinely bright-line rules in the bankruptcy process, and this is one of the primary reasons an experienced bankruptcy attorney should be retained to assist you with a Chapter 7 bankruptcy and, particularly, a Chapter 13 bankruptcy.
If you are a southeast Michigan resident and are interested in exploring your options for personal bankrutpcy, please contact me at (248) 977-4182 or jhilla@aronofflinnell.com to schedule a free consultation.
