Social Security Overpayment is Discharged in Bankruptcy

IMG_0978rSocial Security Overpayment is Discharged in Bankruptcy.  This general rule is subject to a limitation:  Recoupment.  Post bankruptcy filing the Social Security  Administration is allowed to “recoup” at 100% out of future benefits paid.  This is not a set off but is instead recoupment.

Application:  Debtor has overpayment of $25,000 on date of bankruptcy filing.  Debtor does not presently receive social security benefits.  Debtor filed a Chapter 13 Bankruptcy.  At the conclusion of the bankruptcy debtor will have paid 10% of the $25,000 claim through his Chapter 13 Plan with the rest of the claim being discharged in bankruptcy.  Since debtor is no longer receiving any social benefits out of the transaction that involved overpayment, no recoupment of future benefits from this transaction can occur.  Also, if the debtor applies for new social security benefits, he will not have recoupment out of these because these are not the same transaction as the prior overpaid benefits

Application:  Debtor has overpayment of $25,000 on date of Chapter 7 Bankruptcy filing.  At the time of filing debt is still receiving benefits under the original social security transaction that is overpaid.  At the present time his benefits are being withheld through recoupment.  Upon discharge of the Chapter 7 Case, the debt is discharged, but the recoupment can continue on the discharged debt because the future benefits are being recouped and not subject to the discharge.  New and different benefits that are not a part of the original transaction are not affected the present recoupment have not witholding.

Legal Discussion:  See Supporting Cases  case.binder.ssaop.web.2.13.2013

Supporting this analysis are the following cases:

In re Caldwell, 350 B.R. 182

(Affirming Caldwell) Terry v. Standard Ins. Co.

(Affirming Caldwell) In re Irby 359 B.R. 859

Neavear, Matter of   674 F. 2d 120

Forteney v. Liberty LIfe Assurance Co.

In re Adamic 291 B.R. 175

And More Cases



Illinois Tollway Authority – Are Tolls, Penalties & Fines Dischargable In Bankruptcy?

Can all or a portion of your Illinois Tollway Authority bill be discharged in bankruptcy?  Yes and No.

In Illinois, when you file for bankruptcy, the tollway authority is usually listed in Schedule E as a priority debt.  The reason behind this is that in a Chapter 7, fines and penalties are non-dischargeable pursuant to Sec. 523(a)(3).  If the debts under a Chapter 7 bankruptcy are discharged, it is the Tollway’s practice to discharge the underlying tolls, Cite: Illinois Tollway Authority, June 18, 2012.


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