New Jersey Lawyer Explains When Unemployment Benefits are Dischargeable
Typically, an over payment of New Jersey unemployment benefits is dischargeable in bankruptcy, unless the debt was incurred by fraud. Unemployment debt is not included in any of the bankruptcy code exceptions to discharge. Therefore, in a chapter 13 and chapter 7 unemployment debt is generally dischargeable and classified as general unsecured debt.
However, the New Jersey Department of Labor and Workforce Development, Division of Unemployment and Disability Insurance (dept. of labor), may bring a bankruptcy action to deny the discharge of unemployment debt, under the fraud provision of the code, which states as follows:
“(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor’s or an insider’s financial condition;
(iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to deceive; …”
The New Jersey bankruptcy court requires the Department of Labor to prove that the debtor obtained the unemployment debt by actual fraud, which includes the following elements:
“(1) [the debtor] obtained money, property or services through a material misrepresentation; (2) the Debtor, at the time of the transaction, had knowledge of the falsity of the misrepresentation or reckless disregard or gross recklessness as to its truth; (3) the Debtor made the misrepresentation with intent to deceive; (4) the Dept. of Labor reasonably relied on the misrepresentation; and (5) the Plaintiffs suffered loss, which was proximately caused by the Debtor’s conduct.”
The above means that the debtor may discharge the unemployment debt unless the Dept. of Labor can prove, by a preponderance of the evidence, that the debtor is guilty of all five of the above listed elements. A preponderance of evidence means proof of more than 50% that the debtor committed each of the five elements. In other words if the debtor received an over payment without obtaining the funds through fraud, as explained by way of the five elements above, the debt is discharged in a chapter 13 and chapter 7.
Contact the NJ.bankruptcy lawyer, Robert Manchel at 866 503 5644 to discuss your questions.