Can You Discharge California EDD Overpayment Debt in Bankruptcy?
If you’ve received an overpayment notice from the California Employment Development Department (EDD), you may be wondering whether this debt can be wiped out in bankruptcy. The good news is that in many cases, EDD overpayments can be discharged. However, there are important exceptions if the debt was caused by fraud or misrepresentation.
This article explains what EDD overpayments are, how they happen, and when they can be discharged in bankruptcy.
What Is an EDD Overpayment?
The California Employment Development Department (EDD) administers unemployment insurance (UI) and disability benefits. An overpayment happens when the EDD determines that you received more benefits than you were entitled to.
How Do EDD Overpayments Happen?
Overpayments can occur for many reasons, including:
Administrative error – The EDD may miscalculate your eligibility or payment amount.
Delayed reporting – If wages or other income are reported late, the EDD may determine benefits were improperly paid.
Appeals reversals – If benefits were paid while your claim was under review and the decision is later reversed, the payments may be considered overpaid.
Claimant error or misreporting – If you unintentionally or intentionally reported incorrect information (such as underreporting income or failing to disclose employment), the EDD may claim overpayment.
Not all overpayments are the same. The cause of the overpayment often determines whether the debt is dischargeable in bankruptcy.
Can EDD Overpayments Be Discharged in Bankruptcy?
1. Generally Dischargeable
If the overpayment happened due to administrative error or without fraud, the debt is typically treated like any other unsecured debt (similar to credit cards or medical bills). In a Chapter 7 bankruptcy, this type of debt is usually dischargeable.
2. Nondischargeable if Caused by Fraud
Under 11 U.S.C. § 523(a)(2)(A), debts obtained through false pretenses, false representation, or actual fraud are not dischargeable.
Courts have consistently ruled that EDD overpayments caused by intentional misrepresentation cannot be wiped out in bankruptcy. For example:
In re Davis, 668 B.R. 580 (2025) – Debtor’s underreporting of wages to continue receiving unemployment benefits was considered fraud, making the debt nondischargeable.
In re Sanderson, 509 B.R. 206 (2014) – Weekly certifications falsely stating unemployment status were deemed fraudulent, and the overpayments were not discharged.
In re Martinez, 609 B.R. 351 (2019) – Misrepresenting employment status to receive benefits made the debt nondischargeable.
In re Wine, 558 B.R. 438 (2016) – Overpayments, penalties, and collection fees were ruled nondischargeable because they were obtained through false statements.
In re Heinisch, 600 B.R. 393 (2019) – Penalties and interest associated with fraudulent overpayments were also nondischargeable.
3. Penalties and Fees
If the overpayment involved fraud, statutory penalties, fees, and interest charged by the EDD are also considered nondischargeable.
When EDD Overpayments May Be Discharged
If the overpayment was caused by:
EDD administrative error
Delayed reporting not caused by fraud
Reversal of an appeal
then the debt may be discharged in bankruptcy, as long as the EDD does not file a timely objection.
Procedural Considerations
The EDD must take action in the bankruptcy case if it believes the debt is nondischargeable due to fraud. If the EDD fails to file a nondischargeability complaint by the court’s deadline, the debt may be discharged—even if fraud might have been involved.
Key Takeaway
Dischargeable: EDD overpayments caused by mistake, error, or non-fraudulent reasons.
Not Dischargeable: EDD overpayments obtained through fraud, false pretenses, or misrepresentation, including penalties and fees.
Should You File Bankruptcy for an EDD Overpayment?
Bankruptcy can be a powerful tool to eliminate EDD overpayment debt, but every case depends on the specific facts of how the overpayment occurred. If fraud was involved, discharge may be denied. If it wasn’t, the debt may be eliminated along with other unsecured debts like:
Credit cards
Medical bills
Personal loans
Car repossession balances
Apartment lease balances
Old tax debts (in some cases)
Speak With a Bankruptcy Attorney About EDD Overpayments
If you’re facing an EDD overpayment debt and wondering whether bankruptcy can help, don’t wait until collection actions escalate. An experienced bankruptcy attorney can review your case, determine whether the debt is likely dischargeable, and help you protect your financial future.
At Bankruptcy Near Me, we help clients in California and Maryland with Chapter 7 and Chapter 13 bankruptcy cases, including those involving EDD overpayment debts.
📍 Santa Ana, CA Office – 714-798-2544
📍 Kensington, MD Office – 301-550-5408
📧 Contact us today for a free consultation.