If a discharge order excepts a Social Security debt or the bankruptcy proceedings are dismissed, normal collection efforts can be resumed. Otherwise, the bankruptcy judgment will be binding on SSA with repayment (if any) limited to the terms of the discharge order unless the Office of General Counsel (OGC) is successful in objecting to the discharge.

Once a discharge order is received, subsequent action will depend on whether a Proof of Claim was filed (GN 02215.195G.) and whether the debt is discharged without exception or repayment is involved.

In a Chapter 13 bankruptcy, the court approves a plan for the debtor to pay off some or all debt over a 3-5 year period. A portion of the debtor’s income is turned over to a trustee who pays the creditors according to the terms of the plan. A creditor must file a Proof of Claim in order to share in the payments from the trustee. Many plans provide for little or no payments to unsecured non-priority creditors such as SSA. At the conclusion of the plan, the court issues a discharge order which covers all debts “provided for in the plan.” A debt is provided for in the plan if the creditor was listed in the bankruptcy petition and the plan contains a provision concerning that class of debt, even if the provision is to make little or no payments to that class of creditors. The order of confirmation of the plan will specify the amount and intervals of payment (e.g., $25 semi-monthly, $100 monthly, $100 every 2 months). If SSA is not listed in the bankruptcy petition or it is not clear if the debt to SSA was covered in the plan, consult with OGC. If the outcome of a bankruptcy petition is unknown 1 year from the date of the original petition, follow-up with OGC in any bankruptcy situation.

If a Proof of Claim was filed, input a Record Bankruptcy Judgment (DFBJ) screen with a Decision of 1 – FULL DISCHARGE (MSOM DMS 007.007) to delete the debt from ROAR control. Annotate the MBR special message field: “DEBT DISCHARGED.” Pay any subsequently determined underpayment. DELETE ANY PENALTY.

If a Proof of Claim was not filed, simply annotate the MBR as indicated. Pay any subsequently determined underpayment. Make sure that any penalty is also deleted.

If the debt was discharged under Chapter 7, repay any monies withheld effective with the month of bankruptcy filing (i.e., the date of the bankruptcy notice).

If a refund (voluntary, without protest) is subsequently received, deposit the refund in the appropriate trust fund. If the refund does not completely satisfy the debt, do not initiate any follow-up recovery efforts. Clear the remittance control, and change the amount of the outstanding overpayment reflected in the special message field.

If a Proof of Claim was filed under Chapter 7 and repayment is limited to a portion of the debt (see example in GN 02215.230A.2.b.), input a DFBJ screen with a bankruptcy decision of 3, the collectable amount allowed by the court, and a diary date of 6 months to control receipt of the payment. If a Proof of Claim was filed under Chapter 7 and repayment is for the full amount to be refunded, input a DFBJ screen with a bankruptcy decision of 4 and a diary date of 6 months to control receipt of the payment.

If a Proof of Claim was filed under Chapter 13 and specific payments are involved, maintain the TC 23 (or TC 84 if the debt was controlled by RECOOP) indicator. (DO NOT INPUT AN INSTALLMENT AGREEMENT. Establish a diary based on information obtained from the repayment plan to the DRDY screen (MSOM, DMS 007.021).

Follow-up with OGC in any repayment situation if payment is not received when a diary matures and re-diary for no less than 12 months.

If a Proof of Claim was not filed, the debt was deleted from ROAR control (GN 02215.195E.). Consequently, if a discharge order is received in this situation and repayment is involved, reestablish the overpayment on ROAR and proceed as indicated for situations where a Proof of Claim was filed.