March 31, 1981 Social Services; Counties; Impact of Bankruptcy on County Claims for Welfare Payments Made as the Result of Fraud or Misrepresentation; 11 United States Code § 523; Bankruptcy Rule 409.
Subject:
Requested By: Dr. Sarah T. Morrow Secretary of Human Resources
Question: Will bankruptcy of a person who obtained public assistance through fraud or misrepresentation discharge such a person’s liability for repayment?
Conclusion: No, if the county department of social services properly presents its claim.
Where judgment, determining that public assistance was obtained by virtue of fraud, deceit or misrepresentation, is entered prior to filing of the petition in bankruptcy, the judgment will not be discharged. 11 U.S.C.A. § 423, Note 412.
A debt, not reduced to judgment, arising from the debtor having obtained money, property or services by false pretenses, false representations, or actual fraud or through use of a materially false written statement of the debtor’s financial condition, which he made with intent to deceive and on which the agency relied in granting benefits, will not be discharged in bankruptcy court that the debt is not dischargeable appear in 11 U.S.C. § 523(c) and Bankruptcy Rule 409.
A fine, penalty or forfeiture payable to or on behalf of a governmental unit is not discharged if the fine, penalty or forfeiture is not compensation for pecuniary loss. 11 U.S.C. § 523(a)(7).
It is recommended that county departments of social services consult their attorneys before attempting to assert or collect claims against public assistance recipients who have filed bankruptcy proceedings.
Rufus L. Edmisten Attorney General
Henry T. Rosser Assistant Attorney General