What is happens if you are paid unemployment compensation only to later have the claim overturned? What if you received workers’ compensation until your employer fought it and won? If you are now getting demand letters for Social Security Administration, Unemployment Agency or other government entity regarding overpayment of benefits, we are here to help.
Besides filing an appeal to plead your case in front of a judge, the only legal way to resolve debts resulting from overpayment of government benefits is to file a personal bankruptcy. While this may seem daunting, you may be surprised to learn the many benefits to your budget and credit that this options offers.
Our firm specializes in helping Michigan residents find lasting debt relief and financial peace-of-mind. Call us today at 866-261-8282 for a free consultation to understand how to bring swift resolution to government demand letters and other debts that may be impeding your budget and credit. We have six Michigan office locations, conveniently located in: Detroit, Southfield, Warren, Dearborn, Ann Arbor and Flint.
Dealing with Government Penalties for Overturned Benefits: Can I Discharge the Debt in Bankruptcy?
Dealing with penalties assessed by the government for reversed benefits is often worse than paying back the actual amount of the original benefits received. The State of Michigan can assess a penalty up to 4 times the amount of the overpayment!
- Example: You received $10,000 in benefits that were reversed by the State of Michigan. You could be assessed a penalty of up to $40,000, swelling the debt to $50,000.
Here is How the Penalties are Determined:
- If the overpayment is less than $500, you will be required to pay a penalty equaling two times the amount of the overpayment;
- If the overpayment is greater than $500, you will be required to pay a penalty equaling four times the amount of the overpayment.
Penalties are assessed after the State of Michigan makes a determination that the overpayment was fraudulent (vs. an innocent mistake). You would get a notice of an administrative hearing and if you fail to appear, a finding of fraud is made and the penalty is assessed.
If penalties are assessed, then the penalty portion (which is often greater than the overpayment) is NOT dischargeable in a Chapter 7, but CAN be discharged in a Chapter 13 bankruptcy. So in the above example, the $40,000 penalty could not be eliminated in a Chapter 7 but could be consolidated and discharged in a Chapter 13 bankruptcy oftentimes by paying only a portion of the debt through the Chapter 13 Plan.
If fraud is alleged, the state can file an adversary proceeding (this is a type of lawsuit within the bankruptcy) to deem the overpayment amount non-dischargeable in bankruptcy in addition to penalties. If the state prevails on this adversary, the overpayment amount (in the example above, this would be $10,000) becomes non-dischargeable in any type bankruptcy. Although in this example, the penalty amount of $40,000 could still be discharged in a Chapter 13 bankruptcy.
As you can see, there are many factors to consider when determining how to best deal with debts resulting for the overpayment or reversal of government benefits. We offer a free consultation with a licensed Michigan bankruptcy attorney to:
- Discuss all of your available options for debt resolution;
- Answer your question and concerns and;
- Recommend the best course of action to provide debt relief based on your unique circumstances.
Call us today at 866-261-8282 to speak to a licensed attorney or schedule online. We have six convenient Michigan locations in: Detroit, Ann Arbor, Flint, Southfield, Warren and Dearborn.
Chapter 7 Debt Elimination
Chapter 7 bankruptcy provides an immediate resolution to your unsecured debt including overpayment of social security benefits and most often Unemployment and Workers’ Compensation benefits. Assuming that the overpayment was not a result of fraud, you can attain full debt relief for this as well as other unsecured debts, such as:
- Credit cards;
- Medical bills;
- Personal loans;
- Loan deficiencies;
Most often if you are the recipient of these benefits and they are ceased, you don’t have a means to pay back the claimed overpayments or any other debts for that matter. The Chapter 7 will simply wipe the slate clean and provide you with a fresh financial start.
Chapter 13 Debt Consolidation
This debt consolidation program provides court protection while you are making reasonable efforts to pay your debts back. The Chapter 13 program is a comprehensive debt management program.
If we determine that you don’t qualify to file a Chapter 7 and eliminate your debts, you are most likely eligible to consolidate and partially reduce your debts through Chapter 13. The program, that spans 36 – 60 months, simply requires that you make your “best efforts” to pay back your unsecured debts. Whatever balances remain at the completion of the program are legally eliminated or discharged.
In addition, the program allows you to:
- Develop a balanced budget based on your income and expenses
- Prioritize your debts to ensure that your mortgage, vehicle and monthly living expenses are paid before worrying about payments to unsecured creditors
- Pay only what you can afford to pay on unsecured debts, including most claims from a government agency for overpayment of benefits. Full discharge for remaining balances on these debts at the completion of the Chapter 13 program.
- Remove secondary mortgages or home equity loans
- Reduce principal mortgage balance on a rental property(s)
- Stop vehicle repossession or get the vehicle back before it has been sold at auction and reduce your loan payment
A Helping Hand for Michigan Families
While it can be overwhelming to receive a demand letter from a governmental agency or repeated threats from other creditors, we are here to help you find resolution and peace of mind. We offer free in-office or phone consultations to help you find the right debt solution.
We specialize in Chapter 7 and Chapter 13 bankruptcy – in fact that is all that we do. Call today at 866-261-8282 and let one of our debt resolution experts provide you with a free analysis and plan of action to get your finances back on track.