News & Information

CCH® UNEMPLOYMENT INSURANCE — 9/23/16

Bankruptcy court says UI benefit overpayments nondischargeable

In a Chapter 13 bankruptcy, the Kansas Department of Labor (KDOL) filed a complaint seeking a finding that its claim against the debtor for fraudulently receiving unemployment benefit overpayments in 2004 and 2011 was nondischargeable. The court granted both parties' motions for summary judgment in part. The court determined that the debtor's prior bankruptcy in 2006 had discharged the principal balance and associated interest on the 2004 overpayment. In the prior bankruptcy, the KDOL had failed to file a complaint seeking nondischargeability and did not object to the plan that provided for the treatment and discharge of unsecured claims. Thus, concerning the 2004 overpayment the KDOL was bound by its treatment in the 2006 plan. Regarding the 2011 overpayment, the court held that the KDOL was entitled to a judgment of nondischargeability as to the principal amount. Further, the pre-petition and post-petition interest on the 2011 overpayment was excepted from discharge because it did not qualify as a dischargeable government penalty. The KDOL was statutorily entitled to an 18 percent annual interest rate. Moreover, as the court observed where the debt is nondischargeable, interest on the debt is also nondischargeable (In re: Sheila Diane Singleton, U.S. Bankr., (D. Kan.), No. 15-21936, July 7, 2016).