Your unemployment benefits might not be enough to pay for housing, insurance, groceries, and other expenses. Now, to make matters worse, you’ve received a letter telling you the state overpaid you and wants its money back.
The COVID-19 pandemic forced many people out of work for months, causing tremendous financial hardship. If you are in debt and considering bankruptcy, please keep reading to find out if you can discharge unemployment overpayments.
Overpayment of Unemployment Insurance Benefits
You typically must repay an overpayment of unemployment benefits within 60 days. Otherwise, the overage is reported to the Ohio Attorney General for collection. Overpayments happen because of unreported or underreported wages. They also occur through no fault of your own, usually by a clerical error.
However, the coronavirus pandemic has created a wave of potential unemployment benefits. Bankruptcy may or may not be the best decision for you right now. You still have a few options when it comes to the overpayment of unemployment insurance benefits.
You May Be Eligible for an Overpayment Waiver
In 2021, the Ohio Department of Job and Family Services admitted that it overpaid individuals receiving Pandemic Unemployment Assistance. The state overpaid $457 million in unemployment insurance and $2.1 billion in Pandemic Unemployment Assistance for reasons unrelated to fraud.
A repayment waiver allows the state to forgive any overpayment due to their error, not yours. Congress made sure this was an option through the Continued Assistance Act, which authorized states to waive repayment if they found they made a mistake, not the recipient.
Unfortunately, Ohio doesn’t have a set policy on repayment waivers yet, so it isn’t clear if the state will waive all or some of the overpayments. If you’re dealing with an overpayment through no fault of your own, you may wish to file a late appeal until applying for a waiver becomes an option.
Hopefully, Ohio will make a public announcement about overpayment for unemployment benefits and waivers.
Bankruptcy Law and Overpaid Unemployment Benefits
Nothing in bankruptcy law exempts overpayments from discharge. The court treats an overpayment like any other debt, which means it’s possible to get this debt discharged in Chapter 7 or Chapter 13 bankruptcy – provided you did not commit fraud or another unlawful act.
A discharged overpayment could affect future unemployment benefits, though. If Ohio does not require you to repay excess unemployment benefits, it could deduct them from future benefits.
Other Options for Overpayment of UI Benefits
You Can File an Appeal
If you believe the state is wrong in its calculations, consider filing an appeal. It may help to talk with a lawyer about this option. Appealing an official notice of overpayment from the state is complex. You should strongly consider having a lawyer with you to guide you through this process.
You Can Negotiate a Payment Plan
If you underreported or failed to report your income or if you are ineligible for a waiver, you may be able to negotiate a payment plan with the state. An attorney can help you work out the details, terms, and conditions. The state is usually willing to negotiate a payment plan, provided you can show you have the funds to make regular installments on your debt.
Debts You Can Discharge in Bankruptcy
Your overpayment may be one of many bills you owe. Depending on how much you owe and the likelihood that you can or cannot pay your debts, bankruptcy might be a wise decision. A bankruptcy discharge releases you from personal liability for certain kinds of debts.
Creditors have different rights for repayment, depending on the type of debt:
- Secured debts mean there’s collateral involved, like your house or car. You either have to pay to keep your home or car or turn them over to the creditor. A Chapter 7 bankruptcy allows you to give up the property. A Chapter 13 bankruptcy could allow you to extend your payment plan by three to five years.
- Priority unsecured debts lack collateral but must be paid in full during bankruptcy. These include taxes, child support, spousal support/alimony, criminal fines, and personal injury judgments. In Chapter 7 bankruptcy, you sell your assets to pay priority unsecured debts before paying non-priority unsecured debts. If you don’t have enough assets to sell and pay off these debts, you might still owe them after completing the bankruptcy process.
- Non-priority unsecured debts such as medical bills, personal loans, past-due utilities, and credit cards can be discharged in Chapter 7 bankruptcy. For a Chapter 13 bankruptcy, you can pay pennies on the dollar before the remainder is discharged.
Our Bankruptcy Lawyers Help with Overpayment Cases
If you’re in debt and received a notice of overpayment of unemployment benefits, contact Cleveland Bankruptcy Attorneys, LLP for a free consultation. Our bankruptcy lawyers can help you understand your rights and how to achieve financial stability.