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U.S. Treasury Can't Exercise Right of Offset After Bankruptcy is Filed
We represent business owners and individuals in bankruptcy and commercial litigation frequently.  On March 31, 2019, in Wood v. Dept. of Housing & Urban Development (In re Wood), 18-5006 (Bankr. S.D. W.Va. Mar. 31, 2019), the court addressed the issue concerning whether a debtor’s tax overpayment was protected by the automatic stay and was an asset that the debtor could exempt.  The U.S. Treasury had offset a deficiency owed to the Department of Housing and Urban Development, or “HUD”, with a federal tax overpayment after a bankruptcy was filed.  Typically, if one department of the federal government is a creditor of a taxpayer, and another is a debtor, the government will offset the payments.  The Court held that in bankruptcy, such offsets are not allowed. 
In Wood, the debtor, Larry Wood, defaulted on a loan to purchase a mobile home in July 2014.  The loan was insured by HUD, so HUD paid the deficiency on the loan in November 2015.  HUD issued Mr. Woods a “Notice of Intent to Collect by Treasury Offset,” which stated that the U.S. Department of Treasury could offset the deficiency with any of the Woods’ tax overpayments and remit those funds to HUD. 
Mr. Woods and his wife ... more

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