If I Owe SSI Money Can I File Bankruptcy?
The Social Security Administration overpaid some recipients to the tune of $2.547 billion in 2009, according to the SSA website. Although you are supposed to reimburse the SSA for any overpayment of Supplemental Security Income, in some cases, you can keep the overpayment when you declare bankruptcy.
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Identification
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You can include Social Security overpayment benefits with your bankruptcy petition, because the courts consider this an unsecured debt. However, this is unlikely to occur if you have yet to spend the overpayment. You also need to meet the other requirements of bankruptcy, such as making below the median income for your state and having few assets.
Bankruptcy Protection
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Even if you cannot discharge SSI overpayment through bankruptcy, filing for bankruptcy gives you automatic stay protection. Under automatic stay, the SSA must stop all collection efforts until the court lifts the automatic stay protection, whether or not you list the debt in the bankruptcy petition. This includes benefits to minors, who will not be named in the bankruptcy.
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Considerations
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Bankruptcy should be a last resort, especially if you do not have a significant amount of overpayments. Filing for bankruptcy is the worst possible item to have on your credit report, and you can declare bankruptcy only every few years. Thus, filing for bankruptcy primarily for SSI overpayments could harm you in the future, such as if you want to declare bankruptcy due to unexpected medical bills.
Tip
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The SSA offers several alternatives to declaring bankruptcy. For example, if you feel the "overpayment" was your correct payment, or even an underpayment, you can appeal the decision. You can ask for a waiver on the overpayment based on the fact that you did not cause the overpayment, and repayment would cause an undue hardship. Alternatively, you may offset other federal benefits to pay a SSI overpayment, or up to 50 percent of a previous underpayment.
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