It is not an uncommon scenario for people receiving unemployment compensation to find out that they were “overcompensated,” meaning over-paid, by the Minnesota Department of Revenue during their period of unemployment. Often, the Department will send them a letter stating that they received too much money and requesting that the money be paid back. This amount can be in the thousands of dollars. The unfair thing is that it does not matter whether it was the Department of Revenue’s fault or the unemployment compensation recipient’s fault for the overpayment. Either way, the recipient is legally obligated to repay the money. The Department of Revenue can enforce their right to collect on this debt by placing liens on the recipient’s property and even taking the recipient’s expected tax refunds.
However, the good news is that a debt owed to the Minnesota Department of Revenue for unemployment compensation overpayments is dischargeable in bankruptcy. Once a person files a chapter 7 or 13 case, the Department of Revenue becomes just like any other unsecured creditor, and may never collect against that person again. The debt is essentially “wiped out.” However, even though debt owed to the Department of Revenue for an overpayment of employment compensation may be dischargeable, the Department of Revenue does have the legal right to deny future unemployment benefits to that person so long as their remains an outstanding debt.
This is a very basic overview of how bankruptcy impacts unemployment compensation. Bankruptcy law can be very complex and it is always advisable to discuss one’s case with an experienced bankruptcy attorney before filing a bankruptcy case. See us at Lifebacklaw.com!