《楊清泉律師專欄》IS IRS OFFSET OF REFUND VIOLATION OF BANKRUPTCY STAY?（ PART 2 ）
楊清泉律師事務所
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The court found that the debtor’s interest in her tax refund vested on December 31, 2012. When she filed her bankruptcy petition, that interest was included in her bankruptcy estate, and properly claimed as exempt. Because that interest was included in the debtor’s bankruptcy estate, it was protected by the automatic stay, including subsection (a)(7) that specifically stays setoff actions. “To constrain the reach of the automatic stay, Congress enacted Section 362(b). Subpart 26 of that section specifically excepts from violating the automatic stay, the setoff under applicable non-bankruptcy law of an income tax refund, by a governmental unit, with respect to a taxable period that ended before the date of the order for relief against an income tax liability,” the court said. “If the debtor’s interest in a tax overpayment did not become property of that debtor’s bankruptcy estate until after the government applied its offset under Section 6402(a) of the Tax Code.”
Congress had no reason to enact Section 362(b)(26) to except from the protections of the automatic stay such an offset. Congress’ enactment of Section 362(b)(26) presupposes that such property interests become part of the state subject to the stay, except for this express carve out. If the Court were to hold for the property interest in question is not subject to the stay, it would render Section 362(b)(26) unnecessary surplusage. The court concluded that the offset violated the automatic stay. But it seems that my client is out of luck on this one.
“Those who wait for the Lord will gain new strength; they will mount up with wings like eagles, they will run and not get tired, they wall walk and not become weary.” – Isaiah 40:31.
Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave, Mailstop 58, Bldg A-1 Suite 1125, Alhambra, CA 91803.
The court found that the debtor’s interest in her tax refund vested on December 31, 2012. When she filed her bankruptcy petition, that interest was included in her bankruptcy estate, and properly claimed as exempt. Because that interest was included in the debtor’s bankruptcy estate, it was protected by the automatic stay, including subsection (a)(7) that specifically stays setoff actions. “To constrain the reach of the automatic stay, Congress enacted Section 362(b). Subpart 26 of that section specifically excepts from violating the automatic stay, the setoff under applicable non-bankruptcy law of an income tax refund, by a governmental unit, with respect to a taxable period that ended before the date of the order for relief against an income tax liability,” the court said. “If the debtor’s interest in a tax overpayment did not become property of that debtor’s bankruptcy estate until after the government applied its offset under Section 6402(a) of the Tax Code.”
Congress had no reason to enact Section 362(b)(26) to except from the protections of the automatic stay such an offset. Congress’ enactment of Section 362(b)(26) presupposes that such property interests become part of the state subject to the stay, except for this express carve out. If the Court were to hold for the property interest in question is not subject to the stay, it would render Section 362(b)(26) unnecessary surplusage. The court concluded that the offset violated the automatic stay. But it seems that my client is out of luck on this one.
“Those who wait for the Lord will gain new strength; they will mount up with wings like eagles, they will run and not get tired, they wall walk and not become weary.” – Isaiah 40:31.
Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave, Mailstop 58, Bldg A-1 Suite 1125, Alhambra, CA 91803.
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