Bankruptcy – Law Offices of Michael J. Primus

Unemployment and Social Security overpayments are forgiven in bankruptcy

February 20, 2026 by primuswebadmin

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 consultation.

Reference 11 U.S.C. 523(a)(7); Cooper v. Social Security Admin. (9th Cir. 2025)

Chapter 7 Bankruptcy – Necessities of Life or Exemptions – Updated for 2025

September 12, 2025 by Michael Primus

Exemptions. Funny word, right? Exemptions in bankruptcy are assets considered by the law to be necessities of life. Exempt assets are things you keep when you file chapter 7 bankruptcy whereas non-exempt assets can be taken and sold for the benefit of your creditors. Most people considering chapter 7 bankruptcy in Contra Costa County have some general idea about what the system will allow them to keep. The trouble is, most people are wrong! Many people assume they will not be allowed to keep a car. Others assume the judge will come to their house to inventory their clothes. The law is clear, people just need to know their rights. To begin, chapter 7 is the most common type of bankruptcy and is also the strictest. The exemption laws in California give people filing chapter 7 bankruptcy two options:

Option One – Wildcard or 703 Exemptions

These exemptions are generally selected for people who do not own a home, or for homeowners with little or no equity in their home. These exemptions are commonly referred to as the “703” Exemptions, a term derived from the number of the Code section in the California Code of Civil Procedure in which they are enumerated (C.C.P. §703.140). It is also commonly referred to as the “Wildcard” Exemption, getting its name from the fact that §703.140(b)(5) allows for the protection of miscellaneous personal property as discussed below.

Miscellaneous Personal Property (“Wildcard”) – Up to $36,750 (amount as of Jan 1, 2025) in any property owned. If you do not own a home or have no equity in your home, then the Wildcard exemption will protect up to $36,750 worth of your assets. Importantly, the Wildcard exemption may be combined with the other categorized exemptions below, such as the vehicle exemption, for example, in order to protect a car worth far more than the vehicle exemption would otherwise allow.
Household Goods and Furnishings (for example clothing, furniture, appliances, books, instruments, sporting goods, etc.) – are protected.
Jewelry – Up to $2,175 is protected.
Motor Vehicle(s) – Up to a total of $8,625 for one or more vehicles. As noted above, if the value of your vehicle exceeds this amount, or you have multiple vehicles, generally you can use some portion of the Wildcard exemption to protect the remaining value of the vehicles. Also note, with a vehicle that is not paid for, only the equity in the vehicle, if any, must be exempted.
Public Benefits – Benefits offered by the government such as Unemployment, Social Security, Disability, Public Welfare, and Veteran’s benefits are exempt.
Life Insurance with a Cash Surrender Value (often called “whole life” or “Universal Life”) – Up to $19,625 in cash value. Cash value is defined as the amount that can be redeemed while the owner or the insured is alive. Conversely, the death benefit is a much higher amount payable only on death. Bankruptcy and exemptions are unrelated to death benefit amounts.
Tools of the Trade (implements, professional books, tools, other things used for your occupation) – Up to $10,950.
Retirement Accounts – These are exempt in their entirety so long as the retirement is an IRA or an employer sponsored plan like a union pension, 401(k), or 403(b). Self-employment retirement plans like Keogh plans, SEP IRAs and the like are subject to special rules.

Option Two – Homestead or 704 Exemptions

These exemptions are commonly known as the “Homestead Exemption” because the majority of people using these exemptions do so to protect the equity in their home.

Homestead – Covers equity in a primary residence of up to $699,000 in most cases.
Motor Vehicle – Up to $8,625 in one or more vehicles.
Jewelry, Heirlooms, and Art – Up to $10,950 combined value for all items.
Tools of the Trade – Assets used in a person’s (or their spouse’s) trade, business, or profession – Up to $10,950, unless both spouses are engaged in business, then $21,900. Note, however, that a commercial motor vehicle is limited to $4,850; or $9,700 for married couples.
Life Insurance with a Cash Surrender Value (for example “whole life” or “Universal life”) – Up to $15,250 or $30.500 if a husband and wife file bankruptcy together.
Public Benefits – Benefits including Unemployment, Social Security, Disability, Welfare, and Veteran’s benefits are exempt with no monetary limit.
Retirement Accounts – Are exempt in their entirety so long as the retirement is an IRA or an employer sponsored plan like a union pension, 401(k), or 403(b). Self-employment retirement plans like Keogh plans, SEP IRAs and the like are subject to special rules.

The exemption laws are complicated and this is a general description.

At the Law Office of Michael Primus, we have helped hundreds of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy. If you live in Contra Costa County and have debt problems, contact us for a free consultation.

Biblical Thoughts On Bankruptcy

May 28, 2024 by Michael Primus

Biblical Thoughts On Bankruptcy – The concept of bankruptcy is troubling for most people. The Bible offers guidance to both borrowers and lenders. There are four principles to consider.

First, the Bible teaches that people should perform on any agreement including paying debts. This is part of the general principle of the ninth commandment:

“You shall not bear false witness against your neighbor.” (Exodus 20:16)

Similarly, there’s Numbers 30:2 that says:

“If a man makes a vow to the Lord, or swears an oath to bind himself by some agreement, he shall not break his word; he shall do according to all that proceeds out of his mouth.” (Numbers 30:2)

Second, lenders are instructed that interest should not be charged on a loan to the poor. The Lord also forbade the lender from keeping things necessary for living even when the borrower offered such as security:

“If you lend money to any of My people who are poor among you, you shall not be like a moneylender to him; you shall NOT charge him interest. If you ever take your neighbor’s garment as a pledge (security for payment of a debt), you SHALL return it to him before the sun goes down. For that is his only covering, it is his garment for his skin. What will he sleep in? And it will be that when he cries to Me, I will hear, for I am gracious (and, by implication, the lender is not).” (Exodus 22:25-27)

Third, in two parables Jesus used the illustration of forgiveness of a financial debt to teach about God’s forgiveness and the requirement that mankind forgive (see Matthew 18:21-35 and Luke 7:36-50). “And when they had nothing with which to repay, he freely forgave them both” (Luke 7:42).

Fourth, interestingly our modern bankruptcy laws resemble Biblical law as it relates to forgiveness of debt. U.S. Bankruptcy law allows for the forgiveness of most debts every 8 years through chapter 7. Biblical law released debts every 7 years.

“At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother, because it is called the LORD’s release” (Deuteronomy 15:1-2).

Conclusion, people should pay their debts if possible, however the Bible clearly contemplates release of debts and forgiveness for people unable to pay. Modernly that release is found in the bankruptcy laws. Additionally the Bible, like some modern laws, prohibits predatory lending including loans designed to make the borrower a slave to the lender.

Call now for a free consultation.

Law Office of Michael Primus

Do I need to pass a test before I can file bankruptcy?

December 4, 2023 by primuswebadmin

Nowadays most people do some research on bankruptcy before making an appointment to talk to a lawyer. One common concern is the education requirements for bankruptcy. People are required to complete an approved course on credit counseling and a second course on financial management. The courses are specifically for bankruptcy and must be taken from an approved provider. Fortunately, there are many approved providers online, the cost is nominal ($15 to $20) and providers offer fee waivers to low income individuals. I suggest www.accessbk.org for people that ask. Naturally, people wonder if the courses are long or difficult and if there is a test they need to pass. The short answer is no, you do not need to a pass test but there is a mandatory online chat session at the end of each course. Here is a general description of the courses.

Credit Counseling – This course must be completed within 180 days before a bankruptcy filing. This course is a minimum of 60 minutes and is usually taken online. The online course is an automated e-course that can be taken 7 days a week and 24 hours a day. The course generally requires you to input an estimate of your household income and expenses. This estimate is only used for this course and will not be compared to the bankruptcy papers. The course will offer suggestions about your budget. You are not required to implement the suggestions. The course culminates in a one-page certificate of completion. This certificate is filed with the court as part of the bankruptcy papers.

Personal Financial Management – This is the second course. This course must be completed after the bankruptcy is filed. This course is a minimum of 90 minutes and can be taken online. This is a self-enrichment course and you are free to use the information as you see fit.

No computer? No problem. The course can be taken on any computer. People often use a family member’s computer or go to a public library. No computer skills? No problem. Frequently people ask a friend or family member to help them complete the course. Alternatively, some providers offer the course by telephone but the cost is usually higher.

The California Homestead Laws are a Shield for Homeowners

February 26, 2023 by primuswebadmin

The California Homestead laws protect a person’s home from non-mortgage creditor claims in and out of bankruptcy. The homestead laws are part of a broader set of laws called exemptions. In addition to the homestead, the exemption laws protect household goods, furniture, vehicles, retirement and much more. The homestead is the largest exemption and protects the most important asset, your home. As good as that sounds, the homestead has conditions and limitations.

Your Home – The homestead only applies to real estate you own and live in. You do not need to be the only owner to claim the homestead, meaning it is not a problem if there is someone else on title with you or living in the home with you. Similarly, it is not a problem if you rent part of the house to someone else. The idea is to protect the roof over your head.

Value Limitation – The homestead protects realizable equity of up to $678,000 (as of January 2023) in most Bay Area Counites. Realizable equity is the amount of money you would receive if the house was sold, meaning after payment of real estate commissions and all mortgages. For example, assume your home is worth $700,000 and you have a mortgage with a principal balance of $300,000. The calculation is $700,000 minus estimated commissions of $42,000 would leave $658,000 and after payment of the mortgage of $300,000 the realizable equity is $258,000.

No Foreclosure Protection – The homestead does not protect your home from foreclosure by a mortgage lender. This means if your mortgage payments are delinquent and the lender is threatening to foreclose, the homestead laws will not help you.

No Protection from IRS liens – The homestead does not protect against federal tax liens. This means tax liens can be recorded and enforced despite the homestead. Note: many liens that impair the homestead can be removed in bankruptcy but not a tax lien. Fortunately, the IRS almost never attempts to sell a person’s home to satisfy an unpaid tax debt, even huge tax debts.

The homestead in bankruptcy – The homestead is most powerful in the context of chapter 7 bankruptcy. The homestead laws protect your home from being sold to satisfy debts like credit cards, payday loans and medical bills. The homestead, in conjunction with the bankruptcy laws, can even remove judgment liens from the title to your home. The homestead also offers protection in chapter 13 bankruptcy.

The homestead outside of bankruptcy – If a non-mortgage creditor (credit card, payday loan, medical bill) obtains a judgment against you, and attempts to sell your home to satisfy the judgment you are entitled assert the homestead as a defense. Most creditors are well-versed in the homestead laws and do not bother trying to sell a person’s home to satisfy a judgment.

In summary, the homestead laws shield your home from most creditor claims and are most powerful when used in combination with bankruptcy.

Receive a 1099 for a forgiven debt? Fight back!

January 14, 2023 by Michael Primus

Tax form business financial concept: macro view of individual return tax form and blue metal ballpoint pen

This time of year I routinely get inquiries about forgiven debts and the dreaded form 1099. As a general proposition, the tax laws create an obligation to pay tax whenever the taxpayer’s finances improve. For example, a paycheck improves my financial position and creates an obligation to pay tax on that income. With a paycheck the taxes are taken out directly and remitted by my employer. With that in mind, if I owed $30,000 but was able to resolve the debt by paying $5,000 I would have improved my financial position and might assume I would owe tax on the $25,000. Whether I owe the tax depends on my circumstances. A couple examples of forgiven debt provide context before I delve into the rule and its exceptions. Debts can be forgiven in several ways, the most common being settlements and bankruptcy. In a settlement the lender agrees to accept a sum of money to resolve a debt. Generally the amount will be in the range of thirty to sixty cents on the dollar of the balance owed. That means a $5,000 debt might be settled for $1,500 to $3,000. Upon payment the borrower will have no further obligation to the lender. Settlements are common when the original debt was for a credit card or personal loan. Bankruptcy can allow a person to pay little or nothing and have no further obligation to the lender. The bankruptcy system refers to forgiven debts as having been discharged. Regardless of the terminology, the point is the money is no longer owed. That may seem like the end of the story but later the borrower may get a 1099. Form 1099 reflects cancellation of debt by the lender, it does not create a taxable event. In fact, very few people should pay the tax. Unfortunately many people prepare their own tax returns and mistakenly pay the tax. The IRS cheerfully accepts the money! The rule making cancelled debt taxable has two major exclusions discussed below.

The debt was forgiven in bankruptcy. This requires filing bankruptcy and obtaining a discharge from the bankruptcy court.
You were insolvent when the debt was forgiven. This does not require a bankruptcy. It means your debts exceeded the value of your assets at the time the debt was forgiven. The IRS rarely challenges a claim of insolvency.

Either of these exclusions will render the forgiven money non-taxable, you do not need both. All you need to do is attach IRS form 982 to your tax return to clarify why the income reflected in the 1099 is nontaxable. The exceptions are also discussed in IRS form 982 and IRS publication 4681 which can be found on the IRS website at www.irs.gov.

Unemployment and Social Security overpayments are forgiven in bankruptcy

Chapter 7 Bankruptcy – Necessities of Life or Exemptions – Updated for 2025

Option One – Wildcard or 703 Exemptions

Option Two – Homestead or 704 Exemptions

Biblical Thoughts On Bankruptcy

Do I need to pass a test before I can file bankruptcy?

The California Homestead Laws are a Shield for Homeowners

Receive a 1099 for a forgiven debt? Fight back!

Bankruptcy, Not The End But A New Beginning.
We are a debt relief agency.
We help people file for bankruptcy.
We provide Flexible Payment Options.

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Office Locations

925-934-0500

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Option One – Wildcard or 703 Exemptions

Option Two – Homestead or 704 Exemptions

Bankruptcy, Not The End But A New Beginning. We are a debt relief agency. We help people file for bankruptcy. We provide Flexible Payment Options.

Office Locations

Bankruptcy, Not The End But A New Beginning.
We are a debt relief agency.
We help people file for bankruptcy.
We provide Flexible Payment Options.