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Supplemental Security Income overpayment and bankruptcy

Recently on our disability forum a disability recipient asked, “If I have been receiving Supplemental Security Income (SSI) benefits and the Social Security Administration has determined I owe them money for an Supplemental Security Income overpayment can the SSI overpayment be discharged if I file for Chapter 7 bankruptcy protection?”

What are SSI and SSDI?

The Social Security Administration offers two monthly benefit options for claimants who are disabled and unable to work: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). Social Security Disability Insurance is offered to claimants who are insured for SSDI and who have a severe health condition and cannot work for at least 12 continuous months. SSI, however, is offered to the disabled, blind, and elderly who are unable to work for 12 months, who have limited income and resources, and who are not insured for SSDI benefits.

Chapter 7 bankruptcy and SSI benefits

Fortunately, both SSDI and SSI overpayments are considered unsecured debts and are generally discharged if you file for Chapter 7 bankruptcy. In fact, the SSA notes in their SSDI regulations that if you are liable for repayment of a title XVI overpayment and you petition the Bankruptcy Court and include title XVI overpayment(s) as an unsecured debt the SSA will immediately stop their collections efforts for that debt as soon as they are notified your Chapter 7 bankruptcy petition has been filed.

Furthermore, when the Chapter 7 bankruptcy is completed and the court has discharged the debts, the SSA will also be barred from continuing their debt collection efforts to recover the Supplemental Security Income overpayment.

What is the Supplemental Security Income overpayment was for my child?

The SSA has also stated that they will cease collections for Supplemental Security Income overpayments for the dependent children of the debtor as long as the debt is listed on the bankruptcy petition. It will not matter whether the child is listed as the debtor. Because children often receive SSI benefits this could be a frequent occurrence.

What if the SSA continues their attempts to collect overpayments?

The SSA cannot continue their collection of a Supplemental Security Income overpayment unless the bankruptcy proceedings are dismissed or the discharge order exempts the title XVI debt from discharge. If the bankruptcy court discharges the unsecured debt and the debt for the SSI overpayment is not exempted, the amount owed is discharged and is considered uncollectible.

When is the SSI overpayment not discharged?

If you have filed Chapter 7 bankruptcy the Supplemental Security Income overpayment is discharged unless the SSA objects to the discharge and the court approves the exemption. This is very rare but could occur if the court determines the overpayment is to due to fraudulent actions. For example, if you collected Aunt Jenny’s SSI check for two years after Aunt Jenny died and the SSA is requesting that you repay the overpayment the court may agree.

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