A person contacted me about his unemployment debt of around $15,000 (generally a low amount for the cases I am seeing). There was nothing that could be done about that debt other than to repay it. But, there were some issues in his case that everyone should be aware of.
The first thing to know are what the Department will do to collect an unemployment debt.
Department collection tools
The Department will apply the following mechanisms to collect any over-payment, whether the over-payment is related to a charge of fraud or not, to collect unpaid unemployment debts.
Note: None of these collection efforts should occur while an appeal to an administrative law judge or the Labor and Industry Commission is pending. Unfortunately, these collection efforts often occur regardless of any appeal. And, warrants and tax intercept notices have even been issued within days of the first initial determinations, before any appeals can even be filed. In such circumstances, immediately contact collections and inform them that an appeal has been filed and that you are waiting on a hearing or decision. If collection efforts continue despite the pending appeal, the Department is violating federal law.
- Offsets against future unemployment benefits you claim are the main mechanism available to the Department. Note, if fraud/concealment has been charged, however, these offsets will be Benefit Amount Reductions, and so the actual unemployment debt and concealment penalties will have to be repaid some other way.
- Repayment plans should be used whenever possible. Collections staff will agree on paying a lesser amount — what you can afford for six month periods of time. Then the entire remaining amount will be due. If you have not won the lottery in the meantime, Collections staffers will subsequently agree to another six-month repayment plan. That process will continue to repeat.
- Warrants (aka property liens) will be appear when the unemployment debt is large or when repayment is not happening regardless of the amount. Note, despite the use of the word “warrant,” these notices are not actual arrest warrants but property liens that affect your credit rating. Because warrants are public documents, however, others learn about them and will try to take advantage of the situation (more on this problem below).
- Intercept of state tax refunds are applied for in generally all cases, even when a payment plan is in place. There is little you can do to fight these, other than to leave Wisconsin so that you do not file state income taxes anymore.
- Intercept of federal tax refunds are limited by law to over-payments created by the misreporting of wages by a claimant or alleged fraud/concealment. But, the Department routinely ignores this restriction and issues notices to intercept federal tax refunds for any kind of unemployment debt. If that happens to you, you should immediately protest this illegal debt collection.
- Wage garnishments almost never happened ten years ago but now are routinely used if there is no repayment plan and the Department discovers that you are working (through the unemployment taxes that employers file each quarter with the Department). These garnishments will be for 20% of your wages.
- Levies of bank accounts in Wisconsin will occur if there has been no repayment activity for several months. Any Wisconsin bank account with your social security number attached to it will be subject to a levy, and the Department will take as much as needed to repay the debt, except for a base $1000 in the account.
- Bankruptcy is NOT an option, as the Department monitors all bankruptcy filings nationwide and will intervene in any action to make sure that the unemployment debt is NOT written off via bankruptcy.
- Criminal prosecution is likely for any fraud-related over-payments for which debt collection has not happened for a year or more. See Criminalizing unemployment benefits (27 Nov. 2018), and The targeting of African-Americans for criminal prosecution continues in 2020 (10 Feb. 2020). Over 70% of these cases were against African-Americans.
- Over-payment waivers are available IF two conditions are met. First, you need to have been found NOT at fault for the over-payment. Being found not at fault is exceptionally rare, however. Here is some claim-filing data from 2018 and 2019 that explains just how common claimant error is.
In other words, one out of every three claimants who filed a successful, paid initial claim in Wisconsin in these two years ended up having to repay unemployment benefits because of a non-fraud claim-filing mistake. Because they were “at fault” for a claim-filing mistake, they were automatically precluded from any kind of waiver.
This statistic also indicates that claim-filing mistakes are rampant and that a vast number of claimants cannot successfully navigate the claim-filing process without making an error. A system this error-prone is not a well-designed system in the first place.
The second condition varies based on the kind of benefit at issue. For regular unemployment benefits and EB benefits, that other condition is departmental error. See McKay v. Always Construction LLC, UI Hearing No. 13604640MW (13 Sept. 2013) (failure in the unemployment tax case to answer the questionnaire could not be applied to the benefits case, and so there was no claimant fault; and so eligibility in benefits case had no legal or factual basis, so there was departmental error).
For federally funded benefits paid out during the Covid-19 pandemic — PUC ($600 supplemental benefits in 2020 and $300 supplemental benefits in 2021), LWA ($300 FEMA payments for six weeks in 2020) PEUC (extensions of regular unemployment benefits in 2020 and 2021), MEUC ($150 supplemental benefits for independent contractors who were nevertheless collecting regular unemployment benefits or PEUC benefits), and PUA (benefits for pandemic-related job losses to those not eligible for regular unemployment benefits) — the other condition is whether you qualify right now for an equity and good conscience waiver. See also the waiver form and this spreadsheet as a substitute for the third page of the waiver form.
Non-Department collection scams
The person who contacted me had already had a collection warrant/lien filed against him in December 2022 by the Department. I encouraged him to enter into a payment plan for that unemployment debt. In March of this year, he received eight notices about that unemployment debt (click on the image to see a full-sized version).