Does bankruptcy clear unemployment debt to NYS Department of Labor?
I'm drowning in debt right now and considering filing for bankruptcy. I owe the NYS Department of Labor about $4,800 from an overpayment they say I received in 2023. My attorney mentioned that some government debts can't be discharged in bankruptcy but wasn't sure about unemployment overpayments specifically. Has anyone been through this? Will filing Chapter 7 clear my NYS Department of Labor debt or am I stuck with it forever?
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Nia Jackson
Unemployment overpayments are generally NOT dischargeable in bankruptcy if they resulted from fraud or intentional misrepresentation. However, if the overpayment was due to an error by NYS Department of Labor or you made an honest mistake, it might be dischargeable. The key factor is whether there was any willful misrepresentation involved. You'll need to review your overpayment notice carefully to see what reason they gave for the overpayment.
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Luca Romano
AuthorThe notice says 'failure to report work earnings' but I swear I reported everything correctly on my weekly claims. There might have been some confusion about when exactly I started working again.
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Mateo Hernandez
my bankruptcy lawyer told me the same thing - depends on why you owe it. if nys department of labor says you lied or hid income then bankruptcy wont help. but if it was their mistake or just a misunderstanding it might get wiped out
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Luca Romano
AuthorDid you end up filing? What happened with your unemployment debt?
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Mateo Hernandez
still in process but my lawyer thinks mine will be discharged since it was timing confusion not fraud
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CosmicCruiser
You should definitely appeal the overpayment determination first before considering bankruptcy. If you can prove you reported correctly or that NYS Department of Labor made an error, you might not owe anything at all. I had a similar situation where they claimed I didn't report work but I had all my weekly claim confirmations showing I did report. Won my appeal and the debt was completely removed.
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Luca Romano
AuthorHow long did the appeal process take? I'm worried about the time since I really need to move forward with bankruptcy for my other debts.
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CosmicCruiser
Mine took about 3 months total. You can still file bankruptcy and deal with the appeal separately, but if you win the appeal the debt disappears anyway.
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Aisha Khan
If you're having trouble reaching NYS Department of Labor to discuss your options, you might want to check out claimyr.com - they help people get through to actual agents when the phone lines are constantly busy. There's a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. I used them when I needed to resolve an adjudication issue and couldn't get through after weeks of trying.
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Ethan Taylor
How much does something like that cost? I'm already broke which is why I'm considering bankruptcy in the first place.
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Aisha Khan
They focus on the value of actually reaching someone rather than making it expensive. Way cheaper than continuing to deal with collection efforts on a debt you might not even owe.
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Yuki Ito
The bankruptcy code specifically mentions unemployment compensation overpayments in section 523(a)(5) - they're generally non-dischargeable if obtained by fraud but it's not automatic. Your bankruptcy attorney should know this stuff! If they're unsure about unemployment debt discharge they might not be the right lawyer for your case tbh
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Luca Romano
AuthorThanks for the section reference! I'll bring this up when I meet with them again next week.
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Carmen Lopez
ugh the nys department of labor is such a nightmare to deal with. they mess up constantly then act like its your fault when they want their money back. i hope bankruptcy works for you because owing them money is like having a permanent headache
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Julia Hall
I went through something similar last year. The key thing to understand is that bankruptcy courts look at whether you "willfully and knowingly" provided false information. If you genuinely reported your earnings correctly and NYS DOL made an error in their calculation or interpretation, there's a good chance the debt could be discharged. Document everything you have - your original weekly certifications, pay stubs, any correspondence with DOL. Your bankruptcy attorney should be able to argue that this wasn't fraud if you have evidence you reported in good faith. Don't give up hope - I've seen these overpayment determinations get overturned both in appeals and in bankruptcy court.
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