Summary of a Recent
Judicial
Development in
Bankruptcy
Debtor Received Proper Notice of
Offset by USDA
Jeffrey A. PetersonNational AgLaw Center Graduate Assistant
In In re Huff, 343 B.R. 136 (W.D. Pa. 2006), debtor Susan Huff ("Debtor") obtained a loan through the Rural Housing Services ("RHS"), an agency of the USDA, to purchase her residence. See id. at 138. The Debtor sold the residence for less than the amount owed, resulting in a deficiency owed to RHS. See id. In October of 2000, RHS notified the Debtor that it intended to collect the deficiency through the Department of the Treasury's Treasury Offset Program ("TOP"). See id. 139. RHS later offset the Debtor's 2000, 2001 and 2002 income tax refunds. See id. In January of 2004, the Debtor filed a Chapter 7 bankruptcy petition and sought to recover the previously offset tax refunds and discharge the deficiency owed to RHS. See id. The bankruptcy court determined that the RHS failed to comply with the notification requirements under 31 U.S.C. § 3720A when it failed to give notice prior to and after each offset. See id. Consequently, the court held that the offset was improper. See id. at 145.
The United States District Court for the Western District of Pennsylvania reversed the bankruptcy court's decision, reasoning that the Debtor must be given notice at the commencement of the debt submission process and again after the offset has occurred but not prior to each offset. See id.
The case was decided on March 29, 2006; this summary was posted Nov. 6, 2006.