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Elizabeth Prentice
Elizabeth Prentice, Attorney
Category: Bankruptcy Law
Satisfied Customers: 174
Experience:  Managing Attorney for one of the largest consumer bankruptcy firms in America.
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A friend had a $18,000 debt owing to CA.EDD for more than 10

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A friend had a $18,000 debt owing to CA.EDD for more than 10 years. If he worked they would take 100% of his wages, so he didn't work. He wants to file chapter 7 BK and get it discharged. He has lived in complete poverty, his family left him, lost over half of his weight, no utilities, his neighbor ran a garden hose to him to use. He lived in the persistence of hardships. How would he prove to the trustee / court that exemptions apply? Which exemptions and forms are they? Thank you.
I am a bankruptcy attorney and I would be happy to assist you. I am sorry to hear about your friend's situation. In bankruptcy, a debt for CA EDD is generally non-dischargeable. If the debt was due to the debtor's fraud, which is determined by the CA Employment Development Department, it is non-dischargeable even in the event he is able to prove hardship. See, 11 USC section 523. Additionally, even if the the EDD debt was a mistake on the EDD's part, it is still not dischargeable based upon a discharge. Hardship discharge's are only permissible for education debts per federal law and court cases in the 9th circuit, which is where CA is located. See, 11 USC 523(8)(a).

Although the debt is non-dischargeable under any circumstances, the bankruptcy will stay the collection of the debt while the debtor is in bankruptcy. Further, the EDD offers a hardship deferment unrelated to bankruptcy, which the Debtor must apply for and contact the EDD directly to request information. The Debtor may also attempt to retain an attorney to enter into an Offer of Compromise, in which the debt can be reduced and a payment plan created. He should consult with a tax attorney if he is interested in attempting an Offer of Compromise deal. For further information on his options, I recommend that the debtor obtain a consultation with a local tax and bankruptcy attorney in his area.

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Customer: replied 3 years ago.

The problem is : First, it is EDD 's mistake, no fraud involved. Second, if he works EDD will take all of his wages 100%. He couldn't pay for his gas to get to work, let alone rent, food,etc. He pointed that out to the EDD and they replied: "That's not our problem." What good would a deferment possibly do? Could he avoid his CA. EDD debt by moving to and working in another State?

I would recommend he consult with a local tax attorney to discuss the option of either requesting a hardship deferment or an Offer of Compromise. A local CA attorney may be able to institute legal proceedings with the CA EDD on his behalf. Per CA EDD website, overpayments not repaid in a timely fashion result in court cases, garnishments and liens filed against the debtor. The maximum amount the EDD is permitted to garnish is 25% of a person's disposable earnings per CA state law. They will not take 100%. The law supporting this is found here: http://www.edd.ca.gov/pdf_pub_ctr/de9400faq.pdf
Even if he moves, CA will be able to easily continue to garnish his wages.

I hope my answer has assisted you and you will leave me a positive rating!
Elizabeth Prentice and 3 other Bankruptcy Law Specialists are ready to help you
Customer: replied 3 years ago.

Thank you. I learned a lot from you!

You are welcome!