Can a Social Security Overpayment Be Discharged?

Social Security overpayments occur when the Social Security Administration (SSA) determines an individual has received more benefits than they were entitled to. The SSA is legally obligated to recover these funds, which become a debt owed to the federal government. Understanding these overpayments and available options is important for affected individuals.

Understanding Social Security Overpayments

An overpayment occurs when the Social Security Administration (SSA) pays a beneficiary more money than they were actually due. Overpayments can stem from various causes, including administrative errors by the SSA or unreported changes in a beneficiary’s circumstances. Common reasons include unreported income, changes in marital status, living arrangements, or medical improvement affecting disability eligibility. When an overpayment is identified, the SSA sends a notice detailing the amount, reason, repayment options, and rights to appeal or request a waiver.

Repaying Overpayments

If an individual accepts the overpayment, several repayment methods are available. The most common approach involves the SSA withholding a portion of future benefits. For Social Security benefits, the SSA can withhold a significant portion of monthly payments, potentially up to 100%. For Supplemental Security Income (SSI) overpayments, the SSA generally withholds 10% of the maximum federal benefit rate each month.

Other options include making a lump-sum payment or establishing an installment plan, which may involve monthly payments as low as $10. Payments can be made online, via bank bill pay, or by mail. Failure to repay can lead to the SSA intercepting federal tax refunds or pursuing collection actions through the Treasury Offset Program. Non-repayment may also be reported to credit bureaus.

Challenging an Overpayment Decision

Individuals who believe an overpayment determination is incorrect have the right to challenge the decision. This formal process, known as reconsideration, involves asking the SSA to review its initial determination and serves as the first level of appeal. To request reconsideration, beneficiaries typically file Form SSA-561, “Request for Reconsideration,” within 60 days of receiving the overpayment notice.

During reconsideration, individuals should provide any new evidence or arguments supporting their claim. The SSA will review the case and notify the individual of its new decision. If a reconsideration request is filed within 30 days of the notice, the SSA will generally pause collection efforts until a decision is made.

Requesting a Waiver of Overpayment

Even if an overpayment is acknowledged, individuals can request that the Social Security Administration waive, or forgive, the repayment. This process is distinct from challenging the overpayment’s existence. A waiver is granted based on specific criteria. To qualify, two conditions must be met: the individual must show they were “without fault” in causing the overpayment (e.g., SSA administrative error, innocent misunderstanding, or timely but unprocessed reporting); and repayment must either be “against equity and good conscience” or “defeat the purpose” of the Social Security Act.

Repayment is against equity and good conscience if it would deprive the person of funds for ordinary living expenses or if they relied on the SSA’s original payment to their detriment. It defeats the purpose of the Social Security Act if it causes financial hardship by depriving the individual of funds for basic necessities like food and shelter. The formal request for a waiver is made by filing Form SSA-632, “Request for Waiver of Overpayment Recovery.” There is generally no time limit for filing a waiver request, unlike reconsideration. The form requires detailed financial information to assess repayment ability and an explanation of why the overpayment was not the individual’s fault. If the overpayment is $1,000 or less and the individual is not at fault, the SSA may process the waiver request quickly over the phone.

Appealing a Waiver Denial

If an initial waiver request is denied, beneficiaries can appeal this decision. The next step is typically to request a hearing before an Administrative Law Judge (ALJ). This allows the individual to present their case and evidence directly to an independent decision-maker. To request an ALJ hearing, individuals generally file Form HA-501, “Request for Hearing by Administrative Law Judge,” within 60 days of receiving the waiver denial letter.

The hearing allows the beneficiary to explain their situation, provide testimony, and submit documents supporting their waiver claim. If the ALJ’s decision is unfavorable, further appeals are available, including requesting a review by the SSA’s Appeals Council and filing a civil action in federal court. These subsequent stages are more complex and may involve longer processing times.