December 15, 2017

Are Social Security Overpayments Dischargeable in Bankruptcy?

social security demands repaymentBecause I handle both personal bankruptcy cases and Social Security disability cases, I frequently get questions about the interrelationship between these two areas of law.   A question I get at least once a month has to do with whether a Social Security disability overpayment is dischargeable in bankruptcy.

The short answer to this is “yes,” a Social Security overpayment is treated like any other unsecured debt.    There are exceptions to the dischargeability of a particular debt under Section 523 of the Bankruptcy Code and exceptions to the discharge as a whole under Section 727 of the Code.

Specifically, this means, however, that fraudulent behavior can result in a finding that this Social Security debt is not dischargeable.

Overpayment issues typically arise in disability cases when a claimant continues to accept and receive disability payments even after returning to work.  The question then becomes – “did the debtor/claimant knowingly and with intent to deceive the Social Security Administration continue to accept disability payments even when not entitled to do so?”

A 2009 case decided by Judge Joyce Bihary, chief judge of the Bankruptcy Court for the Northern District of Georgia offers helpful insight into how a bankruptcy judge will analyze this issue.

In the Rodriquez vs. United States of America case, debtor Diego Rodriquez collected over $70,000 of disability benefits after returning to work.   Mr.  Rodriquez filed Chapter 7, then asked the Bankruptcy Court to rule on his request for waiver of overpayment.  Judge Bihary found that the Bankruptcy Court did not have jurisdiction over this issue and denied Mr. Rodriquez’ motion about the waiver issue, but she took the unusual step of addressing some of the substantive issues arising from the overpayment problem.

In what is known as “dicta,” the judge explained that under her understanding of the law, “an overpayment debt of Social Security benefits is dischargeable”  and will be treated like any other unsecured debt.   The judge cited a 1982 7th Circuit case called Neavear v. Schweiker as support for her conclusion.  Since Social Security did not file a timely objection to discharge, the overpayment debt owed by Mr. Rodriquez is dischargeable.

What is interesting to me about this decision are the judge’s discussion of the facts.  Apparently, on several occasions, Mr. Rodriquez attempted to advise Social Security about his return to work, but all of these disclosures were ignored by SSA.  Further, the judge noted that Social Security had put Mr. Rodriquez in limbo by failing to respond to his request for administrative review.

The judge devotes almost a page of her decision to suggestions about how SSA might appropriately satisfy its statutory obligations to Mr. Rodriquez.   Reading between the lines, it seems apparent to me that the judge found Mr. Rodriquez’ testimony credible about his efforts to report his employment income to Social Security, but she did not believe Social Security’s assertions (apparently gleaned from documentation and perhaps testimony) that it had not received notice of employment from Mr. Rodriquez.

The judge references Social Security’s ineptitude regarding file management.  Mr. Rodriquez’ deliquentcy grew so large because “SSA lost debtor’s file for a period of five years.”

In my mind, the obvious question in an overpayment case is this – how can a debtor not be guilty of fraudulent behavior if he accepts Social Security payments while at the same time he is working and earning money.  Wearing my Social Security disability lawyer hat I can tell you that Social Security’s rules about trial work periods, its Ticket to Work program and its extended period of disability and work that does not reach the level of “substantial activity” is by no means intuitive and even a sophisticated claimant would not necessarily know when he might be allowed to keep his disability check as well as his paycheck.

The judge in the Rodriquez case did not reach this issue (because Social Security did not raise it) but I get the sense that the judge felt that in this case at least, the debtor tried to play by the rules but received little cooperation from Social Security and that Social Security’s “unclean hands” might very well be held against the agency in a dischargeability inquiry.

So, what can we learn from the Rodriquez case?  I think that if you are attempting to discharge an overpayment you will need to show that you tried to engage Social Security to resolve the issue prior to filing bankruptcy.   If you were confused by Social Security’s rules it would not be a bad idea to explain your areas of confusion in your correspondence with Social Security.   Finally I would make sure that you and your lawyer identify specific addresses where notice of your bankruptcy filing ought to go.  Social Security is such a bloated bureaucracy that they will most likely not file an objection in time – there is no need to give them added life by not offering notice at the correct address.


About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.


  1. It seems that the issue that still is not addressed by this court dicta is why would the Debtor not be liable for fraud when he or she cashes the check, if he or she has reason to know they are not truley entitled to it. Now I get it, the Debtors need money to pay their bills, but at some point there is also the issue of “did you really think you were entitled to this money?”

  2. Melissa DiGiamberdine says:

    Isn’t there a right of offset of future payments?

  3. i’m also curious about the future offset issues. it comes up in overpayments of unemployment compensation scenarios…

  4. The public policy here makes sense. If the overpayment is the government’s fault, then it would be unduly harmful to the individual receiving the benefits to first make plans and allot the money according to their personal circumstances, then have the government take it back while the person is otherwise eligible to file for personal bankruptcy.

    The converse makes sense as well. If it is the individual’s fault, i.e., “fraudulent” as loosely defined by the case law, then regardless of the individual’s dire financial circumstances, he or she should not be permitted to discharge the obligation to repay the overpayment.

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