Sometimes people receive more money from unemployment than they are supposed to get. This can happen in any number of ways, many of which are perfectly innocent.
- You could fill out the unemployment forms wrong, saying that you had more income at your previous job than you thought.
- You could lose your job, apply for unemployment, and start receiving it, but then your previous employer appeals and wins
Unemployment will start paying out the benefits even if the employer appeals the benefits, and will keep paying the benefits until the appeal is resolved.
How does this happen?
If the employer wins the appeal, then the Minnesota Department of Employment and Economic Development (DEED) will retroactively decide that they should not have paid the benefits.
This counts as an unemployment overpayment, and they will start sending bills to you to collect the money.
This can be devastating because not only do you lose your income, but you also have a new debt
How is the unemployment overpayment collected?
The Minnesota Department of Employment and Economic Development has lots of ways to collect the overpayment.
Amongst other things, they can:
- Garnish wages
- Take your Minnesota tax refund
- Take the money from future unemployment benefits you might receive
- A bankruptcy will not discharge an unemployment overpayment, but it will give you some time and financial breathing room to deal with it
The penalties can be even stiffer if the DEED thinks you have gotten the overpayment fraudulently.
WHAT CAN BE DONE ABOUT AN UNEMPLOYMENT OVERPAYMENT?
As I said earlier, unemployment overpayments are not dischargeable in bankruptcy, and unlike most debts, they are not forgiven if you file a bankruptcy. This is true in both Chapter 7 bankruptcy, and Chapter 13 bankruptcy.
Every so often, however, the Minnesota Department of Employment and Economic Development (DEED) will decide not to pursue the matter in bankruptcy court, and allow it to be discharged.
This is uncommon, and becoming even more uncommon, so you should not count on it if you file for bankruptcy.
How can bankruptcy help?
Filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy can be useful if the DEED is garnishing your wages or trying to levy your bank account.
This is because as soon as you file a bankruptcy, you are protected by the court from any act to collect a debt, even a debt that is nondischargeable in bankruptcy.
This protection is called the automatic stay.
The automatic stay forces the DEED to stop any garnishment, and can give you some breathing room to negotiate a payment plan with them.
The bankruptcy will also discharge many of your other debts, leaving you with more money to help pay the unemployment overpayment.
The best thing to do is call the DEED and work out a payment arrangement with them. This will allow you to repay the balance over time, and should leave you with enough money to take care of yourself and your family.
WHAT TO DO NEXT
If you’ve received an unemployment overpayment, and wonder if filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy in Minnesota could help, then why not not speak to us now at 612.824.4357?
We’ll give you all the help and advice you need.
We’re looking forward to helping you.