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Overpayment of Unemployment

Yes, overpayment of unemployment is dischargeable in bankruptcy. If the EDD or Employment Development Department for some reason pays you too much money while you are collecting benefits, and there is no fraud involved, then the overpayment is dischargeable in bankruptcy. Call us toll free at 1-877-963-9543 to schedule a FREE PHONE CONSULTATION or FREE OFFICE CONSULTATION to find out is bankruptcy is right for you.

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The EDD will classify your case as either one involving fraud or non-fraud. Basically a non-fraud case is when you receive benefits and it is not your fault. In some cases a non-fraud debt is forgiven. If the overpayment is due to fraud then bankruptcy will not discharge the debt and the EDD will file court charges against you. Once this happens the total owed continues to grow with court costs, penalties and interest accruing. The EDD can even reduce or take all of your tax return the pay off the debt.

If you are still receiving benefits from the EDD then they can use their right to recoupment to take the money from you. The EDD will reduce your monthly benefit payment until the money is paid back. This can be very difficult if your budget is already stretched to the maximum.

The good news is that in non-fraud cases the debt is dischargeable when filing bankruptcy just like a medical bill or unpaid credit card debts. If you qualify to file a chapter 7 bankruptcy based upon your income, expenses and assets, then all of your eligible general unsecured debts are discharged.

If you collected benefits and you were no eligible because you were actually working or some other reason, there will probably be a problem. You cannot discharge an overpayment of benefits if you have committed fraud or lied to obtain the benefits. Debts incurred by fraud are not dischargeable when filing bankruptcy. You may also be charged criminally for obtaining benefits through fraud.

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