This winter, Aimee Arango tried to escape her debts. She couldn't make ends meet on a $600 monthly income, so she filed for bankruptcy in federal court.
But that's when Oregon officials presented Arango with a bill. The state claimed she owed $75,000.
For 17 years, Arango had received roughly $1,100 a month in cash assistance, food stamps and unemployment benefits, while raising six children as a single mom in Portland.
But as she filed for bankruptcy, the state spotted a problem: She had never legally divorced her husband, so she wasn't entitled to the assistance. The state sued her for $75,000 for three years of alleged violations.
Arango thought she qualified for the money: She was raising the girls alone, without financial support from her estranged husband. And she couldn't pay.
"I'm under poverty, always have been," she says. "And they're still trying to get money from me."
A new federal class action lawsuit says the state routinely goes too far in trying to recoup debts. It alleges Oregon litigators sought money back from people in the midst of bankruptcy proceedings—at the exact moment when they are supposed to be protected from debt collectors.
Welfare cheats aren't popular. But they are often among the poorest and least-educated people in the state. And the federal lawsuit will test the limits of how far state officials can go in getting benefits back.
"They're withholding benefits as leverage—or a stronger word would be extortion," says Clarke Balcom, former chairman of the Oregon Bar Association's debtor and creditor section. "They're holding that over people's heads, inhibiting their very survival, to try to get them to pay something—which would certainly fly in the face of bankruptcy protections."
The class action suit, filed in U.S. Bankruptcy Court in the District of Oregon on Aug. 8, currently has three women signed on. Portland lawyer Michael Fuller believes hundreds more were targeted by state lawyers.
Fuller concedes that in some cases, the women indeed received state benefits they didn't qualify for. But he argues that these cases—including Arango's—often stemmed from honest mistakes that state officials themselves failed to notice.
"The state of Oregon and its bankruptcy litigation attorney Marcus Hull disproportionately harass single mothers of color with unfair lawsuits alleging fraud," Fuller says.
Not only that: The lawsuit alleges the state essentially cut in line, forcing bankruptcy filers to pay debts to the government while other creditors—banks, credit-card companies, mortgage lenders—were forced to wait for the bankruptcy court to divvy up payments between them.
"It's not fair for the state of Oregon to break the rules and try to collect their debt," Fuller says. "It's a fairness issue for all the other creditors."
The Oregon Department of Justice, which represents the state in benefit fraud lawsuits, says it is obligated to taxpayers to recover public funds when it overpays—and hasn't targeted anyone unfairly. (Disclosure: Oregon Attorney General Ellen Rosenblum is married to the co-owner of WW's parent company.)
"We represent the Department of Human Services, which is obligated to recover overpayments of public assistance and food stamps," says DOJ spokeswoman Kristina Edmunson. "We don't take into account a person's race or gender, we simply evaluate the facts."
The plaintiffs are seeking payment of the benefits they have been denied during their bankruptcy cases, plus legal fees.
The lead plaintiff, Donelle Clark of Monroe, Ore., says she knows she cheated the state when she failed to discontinue her unemployment benefits the day she started her new job in December 2014. Instead, she waited three weeks until her first paycheck came.
"I couldn't drive to work without it," she says. "I live 30 or 40 miles from town."
The state made her pay back the three weeks of benefits plus a fine—about $700 total. Clark says that's fair. But this summer, she was laid off from her job—and the state told her she had to wait five weeks for unemployment benefits because of her previous violation even though she had filed for bankruptcy.
Fuller says that's against the law.
"Even if our clients did what the state says they did, the punishment is extremely severe and disproportionate," he says. "It's hard to imagine why the state is using the taxpayers' limited resources to obtain such harsh results."
Clarification: Aimee Arango's former husband, Gabriel Arango, disputes her version of events. He says he lived with and supported the children while working as a mechanic. Aimee Arango testified to her version of events in court filings.