900 F.3d 864
7th Cir.2018Background
- Peggy Berg previously received Social Security disability, returned to work, and was later overpaid $25,690; an ALJ found her without fault and ordered repayment, which she began making.
- Berg stopped working on November 17, 2012; she reapplied for benefits in March 2014 and SSA awarded retroactive disability benefits effective May 2013 (first payable June 3, 2013).
- By July 30, 2014 SSA determined Berg had accrued $20,307 in back-benefits and offset $19,400 of that to recover the remaining overpayment; Berg received $907 and SSA denied reconsideration.
- Berg filed bankruptcy on August 7, 2014, listed the SSA setoff, and sued under 11 U.S.C. §§ 553(b) and 522(h) to recover amounts the SSA offset within the 90-day preference period.
- The bankruptcy court found the setoff elements satisfied but concluded SSA improved its position by $2,015 during the 90-day window (insufficiency on May 9, 2014 was $2,015; no insufficiency on July 30, 2014) and ordered SSA to return $2,015.
- Berg appealed the calculation; the appellate court affirmed, holding benefits accrue month-by-month as of the end of each eligible month, so only $2,015 was recoverable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did Berg’s back-benefits accrue for purposes of the §553(b) 90‑day preference test? | Berg: accrual occurred only on July 30, 2014 when SSA issued the Notice awarding the back-benefits (lump sum). | SSA: benefits accrued monthly beginning May 2013 (per Social Security entitlement rules), so accrual is monthly. | Held: Accrual is monthly as of the last day of each eligible month; on May 9, 2014 insufficiency was $2,015, so Berg recovers $2,015. |
Key Cases Cited
- Lee v. Schweiker, 739 F.2d 870 (3d Cir. 1984) (Social Security monthly benefits accrue when beneficiary survives eligible month; such accruals count for §553(b) insufficiency calculation)
- Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (1995) (Bankruptcy Code preserves existing setoff rights subject to statutory limits)
- Braniff Airways, Inc. v. Exxon Co., U.S.A., 814 F.2d 1030 (5th Cir. 1987) (explains mathematical approach to §553 insufficiency calculation)
- In re Doctors Hosp. of Hyde Park, Inc., 337 F.3d 951 (7th Cir. 2003) (mutuality and enforceability requirements for setoff under §553)
- Matter of Prescott, 805 F.2d 719 (7th Cir. 1986) (purpose of limiting setoffs in the prebankruptcy preference period)
- In re Energy Co-op, Inc., 832 F.2d 997 (7th Cir. 1987) (definitions of "debt" and "claim" relevant to when liabilities accrue)