It depends. The overpayment owed to the unemployment agency along with penalties and interest can be discharged in bankruptcy if filed under chapter 13, which requires a 3-5 year reorganization plan. In Chapter 7, while the underlying overpayment is dischargeable the penalties that are often assessed are not. If you attempt to discharge unemployment overpayment in a chapter 7 the unemployment agency is likely to file an adversary proceeding against you to ask the court for a determination that the penalties are not dischargeable (the penalties can be up to 3 times the original overpayment). While it is often possible to settle with the State of Michigan for a lesser amount it is likely you will still have to pay part of the unemployment debt.

Your Attorney can Help Determine Whether Your Unemployment Debt May Be Discharged in Bankruptcy

A careful assessment of how much you owe to the unemployment agency along with other factors in your financial situation should be discussed with an experience bankruptcy attorney to determine which Bankruptcy might be right for you and how much of the debt is likely to be discharged in bankruptcy.