659 B.R. 24
Bankr. D.N.H.2024Background
- Wendy Edwards (the Debtor) received Social Security Disability Insurance (SSDI) benefits, with a period of overpayments identified by the SSA between 2007 and 2010, resulting in a debt of over $41,000.
- She resumed SSDI benefits in 2022 without repaying the prior overpayment. The SSA notified her that her benefits would be withheld to recover the overpayment.
- Edwards filed for Chapter 7 bankruptcy in April 2022, listing the SSA overpayment as a debt; the SSA unsuccessfully sought to except the debt from discharge.
- After discharge in 2023, the SSA began withholding $400 per month from her SSDI benefits to recover the discharged overpayment.
- Edwards initiated an adversary proceeding, alleging the SSA violated the bankruptcy discharge injunction by withholding benefits post-discharge.
- The SSA moved for judgment on the pleadings, arguing its actions were a permissible recoupment, not a violation of the discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the SSA's post-discharge | SSA's actions are setoff and | SSA's reduction is recoupment | SSA’s benefit reduction is not a permissible recoupment; SSA loses |
| reduction of SSDI violates the | violate discharge injunction | not barred by discharge | |
| discharge injunction | because debts are from | because both arise from | |
| different transactions. | same transaction. |
Key Cases Cited
- In re Holyoke Nursing Home, Inc., 372 F.3d 1 (1st Cir. 2004) (set out distinction between setoff and recoupment, holding recoupment requires same transaction)
- In re Slater Health Center, Inc., 398 F.3d 98 (1st Cir. 2005) (reaffirmed that recoupment rests on the same transaction test)