Articles Posted in Chapter 7 Bankruptcy

Would you know what to do if the Social Security Administration mailed you a letter stating that you have been overpaid and that you owe the government tens of thousands of dollars?  No problem, this oversight can be eliminated in a bankruptcy filing.  My colleague, attorney Jonathan Ginsberg in Atlanta, Georgia practices both bankruptcy law and Social Security law and I asked him to answer the question “can bankruptcy help you if you owe Social Security for a disability overpayment?”  Here is what Jonathan says:

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

The word “household” appears in over a dozen sections of the Bankruptcy Code, but it is not defined in the Code.  Household income and size are extremely important in bankruptcy and determine whether someone qualifies for a Chapter 7 or the length and amount of a plan payment in a Chapter 13.  A debtor’s median income is determined by their family size.

In a Chapter 7, a bankruptcy debtor’s above – or below – median status determines whether the debtor is subject to the means test.

In a Chapter 13, a bankruptcy debtor’s status as above – or below median determines whether the debtor’s maximum plan term is three or five years.  It also determines whether the debtor’s expenses, for the purpose of calculating the debtor’s projected disposable income, are based on the means test or Schedule J.

In a perfect world, a mortgage creditor should:

• Timely file accurate proofs of claim for prepetition arrearage;
• Properly calculate postpetition PITI payment;