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Social Security overpayment and Bankruptcy

SSI overpayment- Can I discharge by filing bankruptcy?

Recently on our disability forum we had a user ask if they could discharge their Supplemental Security Income (SSI) overpayment  or Social Security overpayment by filing Chapter 7 or Chapter 13 Bankruptcy. This blog will address what an overpayment is and your options for discharging or challenging it through bankruptcy.

Why do I have an SSI overpayment?

Overpayments can occur for a variety of reasons, and if you fail to notify the Social Security Administration (SSA) when certain changes occur in your income or living arrangements you may find that you owe the SSA money. So what are the main reasons you might have Social Security overpayment?

  1. Your income is higher than you estimated. (SSI overpayment only)

  2. Your living situation has changed. (SSI overpayment only)

  3. Your marital status has changed. (SSI overpayment only)

  4. You have more resources than the allowable limit. (SSI overpayment only)

  5. You are no longer disabled and you continue to receive disability payments.

  6. You do not report a change in your income as required by the SSA.

  7. The Social Security Administration miscalculated your payment information because incorrect or incomplete information was given to them.

Supplemental Security Income (SSI) is only awarded to disabled claimants who have very limited income and resources. For this reason, if you get married or return to work and you make too much money or your spouse makes too much money your SSI payment can be lowered or terminated.

Consider, however, that if the SSA says you have been overpaid and you believe there has been a miscalculation you can challenge and appeal their decision. The SSA allows you to file a SSA-561 form to contest the Social Security overpayment. The form can be downloaded from the SSA website or you can call the SSA at 1-800-772-1213. All appeals for an overpayment must be made within 60 days from the date of the Social Security overpayment notice.

Filing Bankruptcy for an overpayment

We had a debtor ask if they could file Chapter 7 or Chapter 13 and dismiss or restructure their Social Security overpayment debt. In general, the answer is yes. If you file Chapter 7 bankruptcy the debt can be discharged like any other type of dischargeable unsecured debt. If you file Chapter 13 bankruptcy the debt can be restructured within the Chapter 13 bankruptcy plan. The good news is, unlike the IRS, bankruptcy generally treats the SSA like any other unsecured debtor.

There could be an exception, however, if the SSA decides to challenge the discharge. Although most lawyers agree this is unusual, it could be possible for the SSA to challenge the discharge if they believe the overpayment occurred due to fraud or fraudulent pretenses.

So, for instance, if you continued to receive the overpayment long after you should have known that you were not entitled to the payments the SSA does technically have the right to object to the discharge.

Hiring a bankruptcy lawyer

Although simple Chapter 7 bankruptcies may be done without legal help, if you have assets you would like to keep or you have to file Chapter 13 bankruptcy it is important to talk to a bankruptcy lawyer.