In re Miel
Dec 05, 1991OUTCOME: IRS tax liability discharged.
PROCEDURAL POSTURE: Debtor moved for turnover of tax refunds held by creditor and for creditor to be held in contempt for violating the automatic stay under 11 U.S.C.S. §362(a), and creditor moved to ... lift the automatic stay nunc pro tunc to set off tax refund under 11 U.S.C.S. §523. OVERVIEW: Debtor in Chapter 7 proceeding listed the Internal Revenue Service as an unsecured creditor. Subsequent to filing for bankruptcy, debtor filed her federal income tax return, which reflected a refund due to debtor. Creditor set off all the refund against an outstanding federal income tax liability. The offset was accomplished without obtaining relief from the automatic stay. Debtor claimed the refund was exempt property and filed a motion asking creditor be found in contempt for violating the stay and requesting a turnover of the refund. Creditor filed a motion to lift the stay and to set off the refund. The court held the exemption statute in bankruptcy code precluded creditor from using its right to set off the tax refunds because the tax liability was a dischargeable unsecured claim, creditor was not in contempt of the stay, debtor was entitled to turnover and creditor was not entitled to relief from stay. OUTCOME: The court granted debtor's motion for turnover of tax refunds because bankruptcy statute protected debtor's tax refund from creditor offset, but did not find creditor in contempt and denied creditor's motion to lift the automatic stay and to set off the tax refund.
