Can You File Bankruptcy on Overpayment of State Benefits?

In most cases, yes, you can file bankruptcy on overpayment of certain State benefits. There are two instances where we see this most often. One is with State Department of Labor Unemployment Overcompensation and the other is Department of Human Resources Food stamp overpayment. These overpayments generally happen due to an innocent delay in reporting a change in the recipient’s status or a delay in processing paperwork involved with that change in status.

There are some circumstances where these debts may not be dischargeable. This occurs when the applicable State department has charged you with fraudulently obtaining any of these types of benefits. If there is a fraud charge involved you cannot discharge this debt in bankruptcy, and can even be subject to arrest. Therefore, if you are a recipient of these types of benefits, it is a very good idea to report a change in your eligibility status immediately.

Most of these overpayments’ we see are not fraud and can be included in either a chapter 7 or chapter 13 bankruptcy. This may also vary from state to state depending upon your states policies regarding the recoupment of these overpayment benefits.

If you are struggling with this type of debt or suffering any financial strain at all, please contact our office nearest you and schedule a free consultation with an attorney to discuss your financial issues.