Surprisingly, the answer is yes – as a general rule Social Security disability overpayments are dischargeable in bankruptcy. You can use Chapter 7 to wipe out overpayment claims or Chapter 13 to pay back these claims as general unsecured debts.
Why Social Security Disability Overpayments Happen
Social Security overpayments have become a real problem for many people, often because of poor communication from the government and long delays in how SSA processes overpayments.
After you are approved for disability, Social Security encourages you to try to return to work under a program called the Trial Work Period. Under this program, you are allowed to earn up to a certain amount – called the “substantial gainful activity” limits – without impacting your SSDI receipts at all. The SGA limits change each year, but to give you an idea, the gross earnings limit for 2018 is $1,180 per month.
This means that if your gross earnings for any month in 2018 is $1,179 or less, your SSDI benefits are not impacted. SSA looks at your gross earnings based on date received, month by month.
However, if your earnings for a month in 2018 exceed $1,180, that month counts as a Trial Work Period Month. You can have up to 9 TWP months in any 5 year period.
SSA May Not Catch the Overpayment for Several Years
If you exceed the 9 TWP months, SSA will consider you overpaid. The problem is that Social Security often does not audit your earnings record in real time. You may think that you have only used up 7 TWP months, when in reality you have used up all 9. In such an instance, SSA may conclude that your disability has come to an end and that every month after your TWP ends is an overpayment.
SSA may not catch the overpayment for three or four years. In Jonathan’s Georgia Social Security disability law practice, he regularly speaks with panicked disability claimants who just received a letter from SSA informing them that they owe the government $50,000 for 3 years of overpayments and please return these funds within 10 days.
If you get notice that you have been overpaid, you do have the option to ask SSA for a waiver. Generally speaking you will need to show that either the overpayment was not your fault (difficult to do) or that you do not have the income and resources to pay back some or all of the overpayment.
SSA can pursue collection while they consider your waiver request. We are also finding that SSA has been less willing than they have in the past to grant waivers.
The other option is to use bankruptcy to discharge the overpayment. This may be an attractive option if the overpayment amount is extremely large, or if you have returned to work and do not qualify for a waiver.
Assuming that there is no evidence of fraudulent behavior on your part, Social Security disability overpayments are dischargeable unsecured debt. Discharging this debt will not jeopardize your rights to future payments from Social Security retirement, nor will it impact your rights to pursue disability payments if your health deteriorates.
So, if you have been a recipient of Social Security disability and SSA has written you to say that you owe thousands or tens of thousands of dollars due to an overpayment, do not panic. Instead, pick up your phone and call a bankruptcy lawyer in Christie Arkovich’s office to discuss using bankruptcy to eliminate this debt.
Thanks to Jonathan Ginsberg for his very helpful information to benefit his Georgia and our Florida bankruptcy clients!