Bankruptcy Gets Rid of the Overpayment Debt When Social Security Wants Its Money Back

Bankruptcy Gets Rid of the Overpayment Debt When Social Security Wants Its Money Back

by Richard Fonfrias, J.D. Chicago’s Financial Rescue
& Bankruptcy Lawyer Fonfrias Law Group, LLC


Every month, the Social Security Administration (SSA) pays millions of disabled workers so it’s easy to understand how some of those people might be receiving too much money.

When SSA audits those accounts and sees that they overpaid you, they want you to return the excess to them, right now.

Often, people don’t realize that they’re being paid too much. They figure that as long as they continue to receive benefits, they still qualify for payments in those amounts even when they don’t.

So what is a disabled worker supposed to do? SSA wants the worker to repay thousands of dollars, and the only income that worker might receive is what he gets from SS disability.

Fortunately, you have another option.

As long as you have not committed fraud – such as if you continue to cash checks of someone who has died – then you can erase the debt in bankruptcy. This is because SSA’s overpayments are unsecured, similar to credit card debts and medical bills. So if you don’t have the money to repay the overage, bankruptcy will eliminate it.

Now this doesn’t mean SSA will take no action. In fact, SSA might file an objection with the bankruptcy court claiming that you took the money under false pretenses. If the court agrees, then you are stuck with the bill and must repay SSA. But fraud is very hard for SSA to prove, so the chances that SSA will object to discharging the overpayment are slim.

If you receive a letter from SSA demanding that you return the money, or if you have questions about your benefits, it’s always best to check with an experienced bankruptcy lawyer who can outline your options and help you decide what to do.