Published by Mark

It’s Not Nice To Fool The IRS – Or The Social Security Administration

October 30, 2008 at 4:54 am

No sooner had I finished sharing with my bankruptcy blog readers the welcome news about social security benefits going up 5.8% next year, I read about a man who got a whole lot more than a 5.8% increase out of the Social Security Administration – but not, apparently, in an honest way.

I need to remind readers that, besides paying retirement benefits to seniors, social security pays disability benefits. These benefits are paid to people of working age who cannot work because they’ve suffered an accident or an illness. According to some sources, half of all personal bankruptcy cases and half of all foreclosures happen as at least a partial result of disability-caused medical costs and inability to work. I’m no statistician, but, from talking with tens of thousands of people in one or another of my four Indiana bankruptcy law offices over a period of more than twenty years, I know for sure that uninsured medical expenses have much to do with driving people to file bankruptcy, or putting them in a position to lose their homes to foreclosure. (See Medical Debt Can Be Hazardous To Your Health.)

Getting back to the story, it seems Social Security overpaid William Norris of Enfield (near Hartford, Connecticut) to the tune of more than $140,000. Norris pleaded guilty of accepting those disability payments while he was actually working at the freight company he owned. After investigating Norris, the Social Security Administration turned his case over to U.S. Attorney’s office; now he’s scheduled for sentencing, facing up to five years in prison and a $250,000 fine.

Unlike the few who might scam the system – or try to, at least – the majority of people who collect social security disability payments are truly unable to work; the money they receive is vitally needed for survival. One reality of the social security disability system, though, is that it can take more than a year, and sometimes much longer, for money to start coming in. Often, the debt that piles up means bankruptcy and foreclosure become options some of my Indiana clients are forced to consider. As you may imagine, every individual’s, every family’s, and every business owner’s story is different. Sometimes parents or grandparents go into debt trying to help the younger generation avoid bankruptcy when there’s been a severe illness or disability (see Some Dads And Moms Driven Into Debt Helping Sons And Daughters). Sometimes medical problems come about because people who couldn’t pay for medication developed worse health problems. Employee Benefit Advisor, one of the many journals I read to keep up on things, says 51% of Americans are taking prescription drugs to treat at least one chronic health problem. Then, when layoffs occur, many can’t afford insurance, with the result that their physical condition worsens and they end up with unbearable medical bills.

The social security system and the bankruptcy law system are each meant to serve as safety nets. Each is there to help in times when too many things have gone wrong in people’s lives for them to handle on their own. And, with both social security disability and bankruptcy, it’s really not nice to try and fool the system, but it is nice knowing it’s there!

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