Overpayment of Social Security Benefits

Every so often a claimant comes into my office with a letter from Social Security informing the person that he/she has received an overpayment and social security wants the overpayment repaid.  Usually, the notice also indicates that benefits will not be paid pending resolution of the overpayment.
The concerns are on how to deal with an overpayment.  Many indicate surprise, since they say they contacted social security, sometimes on several occasions, explaining their current situation and were told everything was fine, and benefits continued.  Now they want to know what happened, why it happened and how to solve the problem. 
An overpayment occurs when a person receives payments for which s/he is not eligible or receives a larger benefit than warranted. 
(Generally, if a cessation of benefits is to occur, the month of cessation of benefits should coincide with the month in which the notice of proposed cessation is mailed.  Disability payments received before this notice are not overpayments  However, there are exceptions, seven in fact, where the recipient will be currently notified that benefits should have been terminated in the past:
1.   Recipient was found disabled for a “closed period”.
2.   Recipient returned to work
3.   Recipient was asked for information or sent to an examination and refused to cooperate
4.   Recipient failed to keep SSA informed of his location
5.   Recipient failed to follow treatment that was ‘expected’ to return ability to work)

The authority for recovery of an overpayment, by social security, is found at  42. U.S.C. 404(a)(1)(A):

“404(b) Procedure for adjustment or recovery

(1) Whenever the Commissioner of Social Security finds that more… than the correct amount of payment has been made to any person under this subchapter, proper adjustment or recovery shall be made, under regulations prescribed by the Commissioner of Social Security, as follows:

(A) With respect to payment to a person of more than the correct amount, the Commissioner of Social Security shall decrease any payment under this subchapter to which such overpaid person is entitled, or shall require such overpaid person or his estate to refund the amount in excess of the correct amount, or shall decrease any payment under this subchapter payable to his estate or to any other person on the basis of the wages and self-employment income which were the basis of the payments to such overpaid person, or shall obtain recovery by means of reduction in tax refunds based on notice to the Secretary of the Treasury…, or shall apply any combination of the foregoing….”

The statute provides an escape from repayment by one who is without fault in obtaining an overpayment ( 42 U.S.C. 404(b))—

“(b) No recovery from persons without fault

In any case in which more than the correct amount of payment has been made, there shall be no adjustment of payments to, or recovery by the United States from, any person who is without fault if such adjustment or recovery would defeat the purpose of this subchapter or would be against equity and good conscience. In making for purposes of this subsection any determination of whether any individual is without fault, the Commissioner of Social Security shall specifically take into account any physical, mental, educational, or linguistic limitation such individual may have (including any lack of facility with the English language).”

Clients with a notice of overpayment, always seem to have the same questions.  Social Security said, "I was told I was ok doing what I was doing, how can it now hold me liable? I can’t owe that much?  What happens next?" 
My question usually revolves around the facts, to wit: Is the recipient actually overpaid?  Is the claimant entitled to a waiver?  Is the amount requested computed correctly?
I am only going to speak to the waiver, and specifically concerning recipients of SSI benefits; the other questions are for another day.  If you choose to pursue a waiver of an overpayment, the key element is that the recipient must show that the overpayment occurred through no fault of the claimant. (404.506, 507//416.550,552)

§416.552 sets forth what social security considers a receipt of benefits without fault. .

“Without fault relates only to the situation of the individual seeking relief from adjustment or recovery of an overpayment. The overpaid individual (and any other individual from whom the Social Security Administration seeks to recover the overpayment) is not relieved of liability and is not without fault solely because the Social Security Administration may have been at fault in making the overpayment. In determining whether an individual is without fault, the fault of the overpaid person and the fault of the individual seeking relief under the waiver provision are considered. Whether an individual is without fault depends on all the pertinent circumstances surrounding the overpayment in the particular case. The Social Security Administration considers the individual's understanding of the reporting requirements, the agreement to report events affecting payments, knowledge of the occurrence of events that should have been reported, efforts to comply with the reporting requirements, opportunities to comply with the reporting requirements, understanding of the obligation to return checks which were not due, and ability to comply with the reporting requirements (e.g., age, comprehension, memory, physical and mental condition). In determining whether an individual is without fault based on a consideration of these factors, the Social Security Administration will take into account any physical, mental, educational, or linguistic limitations (including any lack of facility with the English language) the individual may have. Although the finding depends on all of the circumstances in the particular case, an individual will be found to have been at fault in connection with an overpayment when an incorrect payment resulted from one of the following:

(a) Failure to furnish information which the individual knew or should have known was material;

(b) An incorrect statement made by the individual which he knew or should have known was incorrect (this includes the individual's furnishing his opinion or conclusion when he was asked for facts), or

(c) The individual did not return a payment which he knew or could have been expected to know was incorrect.”

What social security considers without fault, is not exactly what common understanding the term connotes.  You could have a case that social security was in fault in making the payments, the recipient called and kept social security informed, but that does not relieve the recipient.  The burden on the recipient is very high.
Although I have handled several case on a  pro bono basis, very seldom will you see a private attorney handling such cases. Why is it so difficult for a claimant to be represented in this situation outside of maybe a legal aid attorney?
In a disability case, the attorney if successful in representing a claimant gets a percentage of the back-benefits awarded to the claimant.  In an overpayment case, there are no back-benefits.  The claimant would have to pay an attorney, but if he or she is in that financial position to make such a payment, Social Security Administration most likely would require repayment of the overpayment.  In addition, the attorney would be arguing lack of funds for repayment, financial hardship, inability to pay an attorney. No attorney would take such a position to do lots of work, and then argue against getting paid.
There is another option.  An overpayment can be discharged in bankruptcy as an unsecured debt, as long as the overpayment is not shown to have been because of fraud on the part of claimant. 
There is a cost to file a bankruptcy and most claimants will be unable to pay the cost, but for a few it is the best way to get rid of the overpayment and get benefits restarted.
Rowan v. Morgan, 747 F.2d 1051 (6^th Cir. 1984) as long as the overpayment not occasioned by fraud, a “…recipient who receives, not without fault, an overpayment of benefits may escape his duty to repay those benefits by means of a quick discharge in bankruptcy.”

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