Unemployment Overpayment & Bankruptcy

If you’ve been notified that you’ve received an overpayment of unemployment benefits, you’re probably wondering whether this will impact your bankruptcy. Here’s what you need to know: 

Unemployment overpayment is a debt.

It has to be listed on your Schedule E/F as a general unsecured nonpriority debt. As with all government debts, the most important thing will be to make sure you have the correct address to list on the schedules. Check the most recent notice or letter you received about this and make sure you’re using the “correspondence” address, not the “payment address” if they are different.

Unemployment overpayment is dischargeable.

Even though this is a debt owed to a government agency, it is erased by a bankruptcy discharge. But, just like with any other debt, if the creditor (in this case the unemployment office) feels that you intentionally misled the agency so you could continue to receive unemployment benefits, they can object to the discharge of the debt. 

How will I know whether there’ll be an objection to the discharge of this debt? 

Unfortunately, you won’t know until the objection is filed with the court. Keep in mind, though, that the objecting creditor will have the burden of proving to the court that you intentionally defrauded them. That’s a high burden for them, so these objections are pretty rare. 

What about pandemic unemployment assistance? 

The same general rules apply to the overpayment of any of the unemployment benefits you received from the state and/or federal government as part of a COVID-19 relief package.