According to the Bureau of Labor Statistics, baby boomers (those born between 1957 and 1964) will experience 5.6 spells of unemployment between ages 18 and 48. Most will apply for, and receive, unemployment insurance. An unemployment overpayment occurs if a person continues to receive unemployment after returning to work. Typically an overpayment occurs when a person is in dire financial straits and has exhausted other options like credit cards and personal loans. That is not to suggest that accepting unemployment after returning to work is just or right. The question is whether an unemployment overpayment is the type of debt society is willing to forgive in bankruptcy, and the answer is, yes, the overpayment can be forgiven.
Many people assume all governmental debts survive bankruptcy, and there are specific provisions in the law that allow some governmental claims to survive bankruptcy but not all. Bankruptcy can forgive claims for monetary reimbursement by a governmental unit including unemployment overpayments and Social Security overpayments. Once a bankruptcy is filed the government must stop any collection efforts including wage garnishments and account levies related to the overpayment. The next question people typically ask is, “What will happen if I apply for unemployment in the future?” The answer is once an overpayment claim is forgiven, there is no basis to deny a future unemployment claim. If you owe money to Employment Development Department related to an unemployment overpayment bankruptcy may be an option for you.
At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy. If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation. We have offices in Walnut Creek, Antioch, and Hercules.
Reference 11 U.S.C. 523(a)(7)