When your state reverses your unemployment insurance claim, the situation is different from a denial or discontinuation of your claim. You must pay back any overpayment of benefits you received regardless of how the overpayment was received. Most states offer payment plan options if you can’t pay back the money you received right away. However, if you fail to pay back the money, you can face further penalties.

Reversal, Denial and Discontinuation

Receiving a benefits reversal is very different from receiving a denial or discontinuation. When the state labor office denies your unemployment claim, it means your information doesn’t meet eligibility requirements at this time. If it discontinues your benefits, it means you met the eligibility guidelines in the past but you don’t for future payments. On the other hand, a reversal of benefits means that you don’t meet the requirements and you never did. This means that the past benefits you received were an overpayment.

Intentional vs. Unintentional

There are two types of unemployment benefit overpayments. Intentional overpayments are situations where you purposely concealed or misrepresented information to receive benefits. This is against the law and you can be criminally prosecuted in some cases. If the overpayment was unintentional, either you or the state labor office made a mistake that caused you to receive money you didn’t qualify to receive. When unemployment benefits are reversed, you must pay back the overpayment amount whether it was an intentional or unintentional act.

Paying Back Benefits

The state labor office will notify you in writing about your reversal by mail. The notification will have the reason for the reversal and the amount of overpayment on your claim. There will be payment information on the notice as well. If you can’t make the payment in one lump sum, some states allow a payment plan, but you have to contact the office listed on the notification to set it up. Interest or payment plan charges may apply.

Failure to Pay

If you don’t pay the overpayment back to the state, you can be penalized further. You will almost always be denied any future unemployment benefits until you pay back your overpayment. As it is a government debt, you can’t include the overpayment debt in a bankruptcy filing, either. Often, the state writes off your debt to a debt collection agency after a few months; the agency may add further interest and fees to it. It also may appear on your credit report as a bad debt after 90 days.