Effective Dates: 2/05/2025 - Present

Identification Number:
GN 02215 TN 60
Intended Audience:See Transmittal Sheet
Originating Office:ORDP OISP
Title:Methods of Recovery for Title II, Title XVI, and Title XVIII Overpayments - Part II
Type:POMS Full Transmittals
Program:All Programs
Link To Reference:
 

PROGRAM OPERATIONS MANUAL SYSTEM

Part GN – General

Chapter 022 – Overpayments

Subchapter 15 – Methods of Recovery for Title II, Title XVI, and Title XVIII Overpayments - Part II

Transmittal No. 60, 02/05/2025

Audience

PSC: BA, CCRE, CS, DCR, DS, LDCR, LDS, PETE, RECONR, SCPS, TSA, TST;
OCO-OEIO: BTE, CR, EIE, FCR, PETL, RECONR, RECOVR;
OCO-ODO: BTE, CST, CTE, CTE TE, PAS, PETE, PETL, RCOVTA, RECOVR;
FO/TSC: CS, CS TII, CS TXVI, CSR, CTE, DRT, FR, OA, OS, RR, TA, TSC-CSR;

Originating Component

OISP

Effective Date

Upon Receipt

Background

We are archiving GN 02215.166, Completion of the Certificate of Indebtedness. We moved these instructions to GN 02215.200, Preparation of the Bankruptcy Proof of Claim, subsection C.

We re-wrote GN 02215.185 to add new instructions for preference payments and recoupment guidance, and updated Regional Chief Counsel (RCC) to Office of General Counsel (OGC).

Summary of Changes

GN 02215.166 Completion of the Certificate of Indebtedness - PC Procedure

We are archiving this section. We moved these instructions to GN 02215.200, Preparation of the Bankruptcy Proof of Claim, subsection C.

 

GN 02215.185 Title II Overpayment - Overview Bankruptcy Proceedings

We updated the title of this section to add the words "Title II Overpayment - Overview" before "Bankruptcy Proceedings".

Subsection A: We re-titled this subsection, defined bankruptcy, provide guidance to contact OGC for any bankruptcy questions.

Subsection B: We re-titled this subsection and added information about the petition that the bankruptcy court sends to OGC.

Subsection C: We moved the information from subsection B.2. regarding the effect of the bankruptcy petition on SSA to its own subsection, updated the actions technicians should take (in general) when OGC sends them the bankruptcy petition, added an example, and a new exception regarding pre-petition debt.

Subsection D: We created this new subsection to add new information regarding preference payments and instructions for sending payment to the bankruptcy trustee when applicable.

Subsection E: We moved the information from subsection A.3. regarding attorney fees, garnishment, etc. from subsection A to its own new subsection for special considerations.

Subsection F: We moved the information from subsection B.3. regarding the effect of a bankruptcy judgement to its own new subsection and added instructions to contact OGC if SSA is first notified about the bankruptcy after the case is discharged.

Subsection G: We moved the information regarding the types of bankruptcies from old subsection C to this new subsection.

Subsection H: We moved the information in subsection C.5. regarding expiration dates to its own new subsection.

Conversion Table
Old POMS ReferenceNew POMS Reference
GN 02215.166 GN 02215.200C

GN 02215.185 Title II Overpayment - Overview Bankruptcy Proceedings

A. Introduction

To obtain relief from liability for repayment of their debts, an individual or spouses together may petition the bankruptcy court. Depending on the type of bankruptcy, before a debtor (overpaid individual) receives a discharge from the court, their assets (if any) may be liquidated to pay their debts or there may be a repayment plan where the debtor makes payments to a bankruptcy trustee who then distributes payments to creditors, such as SSA.

Any questions about a bankruptcy case should be sent, via email, to SSA's Office of the General Counsel (OGC) at ^SSA Bankruptcy.

If a bankruptcy attorney or trustee contacts SSA about a bankruptcy case, refer them to OGC and immediately notify OGC of their contact.

B. Bankruptcy court actions

If the debtor listed SSA as a creditor in their bankruptcy petition, the bankruptcy court will send a notification of the bankruptcy petition to SSA and the other listed creditors. Most such notifications are sent via the court's electronic bankruptcy notification system directly to OGC. OGC reviews and forwards the notice to the appropriate component for specific action (PC with jurisdiction for Title II debts and the Regional Office (RO) for Title XVI debts. If an initial notification of a bankruptcy is received by mail or submitted in person by the debtor, such notification should be immediately forwarded to OGC via email to ^SSA Bankruptcy for prompt review.

The filing of a bankruptcy petition triggers an automatic stay of collections. When the automatic say is in effect, creditors (such as SSA) generally may not initiate or continue collections of pre-petition debt owed by the debtor who filed for bankruptcy.

Depending on the case, months or years later, the bankruptcy court will rule on the extent to which the debts may be discharged and advise the creditors accordingly.

C. Effect of the bankruptcy on SSA

Upon notification of the bankruptcy from OGC, take the following actions:

  1. 1. 

    To comply with the bankruptcy automatic stay: (a) immediately stop collection of any outstanding debt owed by the debtor who filed for bankruptcy, which arose before the date they filed the bankruptcy petition ("pre-petition" debt), whether or not they listed the amount of the debt in their petition; and (b) promptly issue a refund of any amount of pre-petition debt that was collected after the bankruptcy petition date (refer to GN 02215.190B2 and GN 02215.195E). A debt arises for a benefit month that the individual should not have been paid, not when the overpayment is assessed or discovered by SSA.

  2. 2. 

    If a waiver request is pending or received while the bankruptcy case remains pending, do not process the request or issue a decision, unless otherwise advised by OGC. Add a remark to the record: “Hold waiver request filed (date) – bankruptcy decision pending.”

  3. 3. 

    If applicable, prepare a Proof of Claim and send to OGC via email (^SSA Bankruptcy) per GN 02215.195F and GN 02215.195G.

  4. 4. 

    If fraud or similar fault is involved, promptly notify OGC via email (^SSA Bankruptcy) for possible filing of an objection to dischargeability of the debt owed to SSA, refer to GN 02215.196.

  5. 5. 

    Update the Master Beneficiary Record (MBR) with the following Special Message: "Bankruptcy Involved for BIC (insert the BIC) - Contact OGC at ^SSA Bankruptcy for Questions."

EXAMPLE: A Chapter 7 bankruptcy petition is filed on February 21, 2023. As of that date, an overpayment of $5,000 existed on the record. Because the individual was overpaid the $5,000 between January 2020 and June 2022, that overpayment arose pre-petition. In May 2023, SSA learns that the debtor had engaged in substantial gainful activity, and assesses an additional overpayment of $3,000, consisting of $2,000 overpaid between September 2022 and February 2023, and $1,000 overpaid between March 2023 and May 2023. Of that newly assessed overpayment, $1,000 arose after the bankruptcy petition. The other $2,000 arose pre-petition and is therefore subject to the bankruptcy. To avoid violating the automatic stay, while the bankruptcy remains pending, we will not send a notice to the debtor regarding the $2,000 pre-petition debt, and collections remain suspended as to that overpayment and the original $5,000 pre-petition overpayment.

EXCEPTION: In specific cases, OGC will advise if benefit withholding may continue because SSA has a right to recoupment of pre-petition debt. OGC will provide detailed instructions in such cases.

NOTE: 

If any other individual who did not file for bankruptcy has contingent or joint liability for pre-petition debt, see GN 02215.185E.

Unless advised by OGC, while the bankruptcy petition is pending in bankruptcy court, do not write or otherwise contact the debtor about their pre-petition overpayment.

D. Requests for payment to bankruptcy trustee

If you receive a request or order to direct payments to a bankruptcy trustee, or a debtor or debtor's attorney contacts you about a bankruptcy case for any other reason, contact OGC (^SSA Bankruptcy) for guidance.

1. Preference payments

A preferential debt payment is a payment a debtor makes for the benefit of certain creditors within 90 days before filing for bankruptcy. For example: Jordan Monroe has an outstanding debt balance of $5,000, sends SSA a remittance for $5,000 on March 4, 2020, and now their debt balance is $0. Jordan files for bankruptcy April 20, 2020. The payment Jordan made is now considered a preference payment.

Under the Bankruptcy Code, 11 U.S.C. § 547(b), a trustee may demand payment from a creditor, even without a court order, where the debtor made a preference payment to the creditor shortly (within 90 days) before filing for bankruptcy (the preference period). The anti-assignment provision of Section 207 of the Act does not preclude the agency from making a payment to a bankruptcy trustee to return an overpayment that the debtor repaid to SSA.

When OGC advises sending payment to the bankruptcy trustee, SSA must make the payment from the Limitation on Administrative Expenses (LAE) account, and not from the trust fund. The technician will send the following information via email to PC2 (^PHI ARC PCO DMS Bankruptcy) where they will request to have an Intergovernmental Payment (IPAC) issued by the Office of Finance:

  • •

    EIN,

  • •

    Name of Agency,

  • •

    Address,

  • •

    Attention, and

  • •

    Memo.

Once the Office of Finance issues the refund, PC2 will provide the IPAC number and confirm the amount refunded. Document your actions in the Remarks Screen in the Debt Management System (DMS).

When repaying the preference payment to the trustee, make sure to update the debt balance to the amount it was before the preference payment reduced it. If the preference payment fully recovered the debt, re-establish it with the correct balance, but do not send any notice to the debtor, and there is no due process period. Make sure to update the applicable debt if the debtor has multiple debts.

2. Orders to pay bankruptcy trustee

A bankruptcy court order to pay the debtor's benefits directly to a bankruptcy trustee cannot be honored per GN 02410.005. Contact OGC (^SSA Bankruptcy) if you receive a bankruptcy court order.

E. Special considerations

When a debtor who files for bankruptcy is a representative payee, we stop all collection activity for the debtor's personal debts, not the beneficiary who did not file for bankruptcy (e.g., withholding from the beneficiary's benefit may continue).

When a debtor who files for bankruptcy is jointly liable for an overpayment, we do not stop collection activity from any other jointly liable individual(s) or entity who has not filed for bankruptcy.

EXAMPLE: Lawrence (the beneficiary) and their representative payee, Dustin, are jointly liable for a debt. Dustin files for bankruptcy. We will stop collection activity for Dustin only because they were the only one to file for bankruptcy. Collection activity continues for Lawrence.

EXAMPLE: Thea is receiving benefits as the number holder and is also the representative payee for Niam, who is receiving auxiliary benefits on Thea's record. Thea is overpaid and files for bankruptcy. Niam is also overpaid but has not filed for bankruptcy. We will stop collection activity for Thea only.

When a debtor who files for bankruptcy has a debt for which they are contingently liable, we will wait for them to obtain their discharge in bankruptcy. Once they receive their bankruptcy discharge, we will transfer the debt back to the originally liable individual or the next individual in the adjustment order of priority, refer to GN 02210.015.

When a debtor has filed for bankruptcy and attorney fees are involved, follow the instructions in HALLEX I-1-2-3C.    

When a debtor has filed for bankruptcy and garnishment (i.e., child support or alimony) is involved, follow the instructions in GN 02410.221.

When a debtor has filed for bankruptcy and tax levy is involved, this will have no effect on our business process for a tax levy. We will not stop the tax levy withholding unless instructed to do so by the Internal Revenue Service (IRS).

When a debtor dies while a bankruptcy petition is pending, contact OGC (^SSA Bankruptcy) to verify whether the bankruptcy case is dismissed and we may attempt recovery from the deceased’s estate.

F. Effect of a bankruptcy judgement on SSA

If the bankruptcy court does not dismiss the case, it will ultimately rule on the extent to which debts are discharged, refer to GN 02215.230. OGC transmits dismissal, discharge, and other relevant court orders to the appropriate component for specific action.

If SSA was first notified of a bankruptcy case after discharge, immediately contact OGC (^SSA Bankruptcy) and wait for a response before processing the discharge order.

G. Types of bankruptcies

1. Chapter 7

In a Chapter 7 case, a discharge is only available to individual debtors, not partnerships or corporations. Although an individual Chapter 7 case usually results in a discharge of personal liability for debts, the right to a discharge is not absolute, and some types of debts are not discharged. The bankruptcy court usually issues a discharge within a few months after the Chapter 7 petition is filed.

Filing a petition under Chapter 7, automatically stops most collection actions against the debtor or the debtor’s property. If the stay is in effect, creditors (such as SSA) generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

In most Chapter 7 cases, there are no assets to distribute to creditors. However, when there are assets in a Chapter 7 case (or assets are later discovered, even after a discharge), the court notifies creditors so that they can file a Proof of Claim to receive distribution(s) from the bankruptcy trustee. 

A Chapter 7 bankruptcy may apply to pre-petition debts even if the creditor has not been listed in the petition, and even if the pre-petition debt is assessed later. If SSA was not notified of the Chapter 7 bankruptcy before the discharge, contact OGC (^SSA Bankruptcy) before processing the discharge order.

EXAMPLE: Wesley received disability benefit payments for all months in 2006 and filed for bankruptcy in February 2007. The bankruptcy court grants a discharge in May 2007. In September 2007, SSA determines that Wesley is overpaid for all of 2006, based on substantial gainful activity (SGA). Wesley then advises SSA of the bankruptcy. The overpayment is pre-petition debt because it arose before February 2007. Although SSA is usually not able to recover any part of this debt, OGC is contacted to review the case.

2. Chapter 11

A Chapter 11 petition is usually filed by a corporation or partnership with a proposal for a reorganization plan. OGC will provide guidance on Chapter 11 cases.

3. Chapter 12

A Chapter 12 petition is designed for “family farmers’ or “family fishermen” with regular annual income. For SSA purposes, processing is the same as Chapter 13.

4. Chapter 13

A Chapter 13 bankruptcy, also called a wage earner’s plan, enables individuals with a regular source of income to develop a plan to repay all or part of their debts through a bankruptcy trustee. A creditor files a Proof of Claim to receive payments from the bankruptcy trustee under the Chapter 13 plan. The plan lasts for three to five years. Unless the bankruptcy court orders otherwise, the debts will not be discharged until all payments under the plan are made to the bankruptcy trustee.

A Chapter 13 bankruptcy applies only to pre-petition debts owed to those creditors who have been listed in the petition, or otherwise timely notified of the bankruptcy. The debt amount does not need to be listed in the petition. If SSA receives its first notification of the Chapter 13 bankruptcy months after the bankruptcy was first filed, contact OGC (^SSA Bankruptcy) before stopping collections or processing the discharge order.

H. Important expiration dates

As stated in the initial notice of bankruptcy, SSA generally has 180 days from the date of the bankruptcy petition to file a Proof of Claim (refer to GN 02215.195F and GN 2215.195G), and 60 days from the date of the first scheduled meeting of the creditors to file a complaint to determine whether a debt is a dischargeable debt.

NOTE: 

The court may shorten or lengthen these deadlines. OGC monitors relevant deadlines and includes the Proof of Claim deadline when notifying the appropriate component of each new bankruptcy case.


GN 02215 TN 60 - Methods of Recovery for Title II, Title XVI, and Title XVIII Overpayments - Part II - 2/05/2025