Brief reply: You possibly can discharge unemployment overpayments in each a chapter 7 and a chapter 13, however provided that they don’t battle you over it for fraud. In the event that they battle you, you’ll lose.
Lengthy reply: Most money owed are dischargeable in chapter (they are often worn out). There’s a fairly restricted listing of money owed which can be non-dischargeable. Below 11 U.S.C. 523, the next money owed are non-dischargeable (see listing at backside of web page, with daring added).
Unemployment overpayments are usually not particularly listed within the group of money owed that can not be discharged. In different phrases, they usually can and are discharged. Nonetheless, if the state has alleged fraud with these overpayments, it opens an entire new can of worms.
If the state has alleged that you just dedicated fraud in receiving these advantages, you possibly can nonetheless listing them in your bk. After you file, the state has 3 months to file a chapter lawsuit to indicate that these overpayments had been obtained by fraud. In the event that they file that lawsuit, referred to as an “adversary continuing,” you’re most likely going to lose. You’ll nonetheless owe these overpayments. If the state will get a chapter court docket judgment that these money owed are based mostly on fraud, they win, and also you’ll nonetheless have to pay them again, finally.
Now I do know that you’re pondering that you just didn’t imply to commit fraud, and also you’ll battle them in chapter court docket to show that you’re proper. “Fraud” is such a harsh time period, and it was extra of a easy accounting misunderstanding. Nonetheless, it’s costly to battle them (this isn’t a part of your regular chapter), and they’re nearly all the time proper. In the event you actually suppose you possibly can beat their fraud lawsuit, be ready to pay a minimum of one other $5,000 to one more legal professional to battle their adversary continuing.
And sure, this is applicable to state unemployment advantages, and people federal Pandemic Unemployment Help (PUA) funds as nicely.
Right here is that listing of money owed that can not be discharged:
(word that there are various exceptions to the tax ones).
(1)for a tax or a customs responsibility—(A)of the sort and for the intervals laid out in part 507(a)(3) or 507(a)(8) of this title, whether or not or not a declare for such tax was filed or allowed;
(B)with respect to which a return, or equal report or discover, if required—(i)was not filed or given; or
(ii)was filed or given after the date on which such return, report, or discover was final due, below relevant legislation or below any extension, and after two years earlier than the date of the submitting of the petition; or
(C)with respect to which the debtor made a fraudulent return or willfully tried in any method to evade or defeat such tax;
(2)for cash, property, providers, or an extension, renewal, or refinancing of credit score, to the extent obtained by—(A)false pretenses, a false illustration, or precise fraud, apart from an announcement respecting the debtor’s or an insider’s monetary situation;
(B)use of an announcement in writing—(i)that’s materially false;
(ii)respecting the debtor’s or an insider’s monetary situation;
(iii)on which the creditor to whom the debtor is chargeable for such cash, property, providers, or credit score moderately relied; and
(iv)that the debtor induced to be made or printed with intent to deceive; or
(C)(i)for functions of subparagraph (A)—(I)shopper money owed owed to a single creditor and aggregating greater than $500  for luxurious items or providers incurred by a person debtor on or inside 90 days earlier than the order for reduction below this title are presumed to be nondischargeable; and
(II)money advances aggregating greater than $750 2 which can be extensions of shopper credit score below an open finish credit score plan obtained by a person debtor on or inside 70 days earlier than the order for reduction below this title, are presumed to be nondischargeable; and
(ii)for functions of this subparagraph—(I)the phrases “shopper”, “credit score”, and “open finish credit score plan” have the identical meanings as in part 103 of the Reality in Lending Act; and
(II)the time period “luxurious items or providers” doesn’t embody items or providers moderately obligatory for the assist or upkeep of the debtor or a dependent of the debtor;
(3)neither listed nor scheduled below part 521(a)(1) of this title, with the identify, if recognized to the debtor, of the creditor to whom such debt is owed, in time to allow—(A)if such debt shouldn’t be of a sort laid out in paragraph (2), (4), or (6) of this subsection, well timed submitting of a proof of declare, until such creditor had discover or precise data of the case in time for such well timed submitting; or
(B)if such debt is of a sort laid out in paragraph (2), (4), or (6) of this subsection, well timed submitting of a proof of declare and well timed request for a willpower of dischargeability of such debt below one in every of such paragraphs, until such creditor had discover or precise data of the case in time for such well timed submitting and request;
(4)for fraud or defalcation whereas performing in a fiduciary capability, embezzlement, or larceny;
(5)for a home assist obligation;
(6)for willful and malicious harm by the debtor to a different entity or to the property of one other entity;
(7)to the extent such debt is for a high quality, penalty, or forfeiture payable to and for the advantage of a governmental unit, and isn’t compensation for precise pecuniary loss, apart from a tax penalty—(A)referring to a tax of a sort not laid out in paragraph (1) of this subsection; or
(B)imposed with respect to a transaction or occasion that occurred earlier than three years earlier than the date of the submitting of the petition;
(8)until excepting such debt from discharge below this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—(A)(i)an academic profit overpayment or mortgage made, insured, or assured by a governmental unit, or made below any program funded in complete or partly by a governmental unit or nonprofit establishment; or
(ii)an obligation to repay funds obtained as an academic profit, scholarship, or stipend; or
(B)some other instructional mortgage that may be a certified training mortgage, as outlined in part 221(d)(1) of the Inside Income Code of 1986, incurred by a debtor who’s a person;
(9)for demise or private harm attributable to the debtor’s operation of a motorized vehicle, vessel, or plane if such operation was illegal as a result of the debtor was intoxicated from utilizing alcohol, a drug, or one other substance;
(10)that was or might have been listed or scheduled by the debtor in a previous case in regards to the debtor below this title or below the Chapter Act wherein the debtor waived discharge, or was denied a discharge below part 727(a)(2), (3), (4), (5), (6), or (7) of this title, or below part 14c(1), (2), (3), (4), (6), or (7) of such Act;
(11)offered in any remaining judgment, unreviewable order, or consent order or decree entered in any court docket of america or of any State, issued by a Federal depository establishments regulatory company, or contained in any settlement settlement entered into by the debtor, arising from any act of fraud or defalcation whereas performing in a fiduciary capability dedicated with respect to any depository establishment or insured credit score union;
(12)for malicious or reckless failure to satisfy any dedication by the debtor to a Federal depository establishments regulatory company to take care of the capital of an insured depository establishment, besides that this paragraph shall not prolong any such dedication which might in any other case be terminated as a consequence of any act of such company;
(13)for any fee of an order of restitution issued below title 18, United States Code;
(14)incurred to pay a tax to america that may be nondischargeable pursuant to paragraph (1);
(14A)incurred to pay a tax to a governmental unit, apart from america, that may be nondischargeable below paragraph (1);
(14B)incurred to pay fines or penalties imposed below Federal election legislation;
(15)to a partner, former partner, or little one of the debtor and never of the sort described in paragraph (5) that’s incurred by the debtor in the midst of a divorce or separation or in reference to a separation settlement, divorce decree or different order of a court docket of document, or a willpower made in accordance with State or territorial legislation by a governmental unit;
(16)for a fee or evaluation that turns into due and payable after the order for reduction to a membership affiliation with respect to the debtor’s curiosity in a unit that has condominium possession, in a share of a cooperative company, or loads in a owners affiliation, for so long as the debtor or the trustee has a authorized, equitable, or possessory possession curiosity in such unit, such company, or such lot, however nothing on this paragraph shall besides from discharge the debt of a debtor for a membership affiliation payment or evaluation for a interval arising earlier than entry of the order for reduction in a pending or subsequent chapter case;
(17)for a payment imposed on a prisoner by any court docket for the submitting of a case, movement, criticism, or enchantment, or for different prices and bills assessed with respect to such submitting, no matter an assertion of poverty by the debtor below subsection (b) or (f)(2) of part 1915 of title 28 (or an identical non-Federal legislation), or the debtor’s standing as a prisoner, as outlined in part 1915(h) of title 28 (or an identical non-Federal legislation);
(18)owed to a pension, profit-sharing, inventory bonus, or different plan established below part 401, 403, 408, 408A, 414, 457, or 501(c) of the Inside Income Code of 1986, below—(A)a mortgage permitted below part 408(b)(1) of the Worker Retirement Revenue Safety Act of 1974, or topic to part 72(p) of the Inside Income Code of 1986; or
(B)a mortgage from a thrift financial savings plan permitted below subchapter III of chapter 84 of title 5, that satisfies the necessities of part 8433(g) of such title;
however nothing on this paragraph could also be construed to supply that any mortgage made below a governmental plan below part 414(d), or a contract or account below part 403(b), of the Inside Income Code of 1986 constitutes a declare or a debt below this title; or
(19)that—(A)is for—(i)the violation of any of the Federal securities legal guidelines (as that time period is outlined in part 3(a)(47) of the Securities Change Act of 1934), any of the State securities legal guidelines, or any regulation or order issued below such Federal or State securities legal guidelines; or
(ii)frequent legislation fraud, deceit, or manipulation in reference to the acquisition or sale of any safety; and
(B)outcomes, earlier than, on, or after the date on which the petition was filed, from—(i)any judgment, order, consent order, or decree entered in any Federal or State judicial or administrative continuing;
(ii)any settlement settlement entered into by the debtor; or
(iii)any court docket or administrative order for any damages, high quality, penalty, quotation, restitutionary fee, disgorgement fee, legal professional payment, price, or different fee owed by the debtor.
For functions of this subsection, the time period “return” means a return that satisfies the necessities of relevant nonbankruptcy legislation (together with relevant submitting necessities). Such time period features a return ready pursuant to part 6020(a) of the Inside Income Code of 1986, or comparable State or native legislation, or a written stipulation to a judgment or a remaining order entered by a nonbankruptcy tribunal, however doesn’t embody a return made pursuant to part 6020(b) of the Inside Income Code of 1986, or an identical State or native legislation.