Lockhart v. Washington County Child Support Enforcement Agency

No. 1:20-ap-00038 Doc67_ Filed 06/24/21 Entered 06/24/21 17:03:03 Page □□ □□

0 Order Entered.

United States Bankruptcy Judge

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

IN RE: )

)

KENNETH DWAYNE LOCKHART, ) Case No.: 1:17-bk-00532

)

Debtor. ) Chapter 13

____)

)

KENNETH DWAYNE LOCKHART, )

)

Plaintiff, )

)

v. ) AP No.: 1:20-ap-38

)

ETHEL MARCIE JACKSON, )

WASHINGTON COUNTY, )

WASHINGTON COUNTY CSEA, )

WEST VIRGINIA BUREAU FOR )

CHILD SUPPORT )

ENFORCEMENT, and )

INTERNAL REVENUE SERVICE, )

)

Defendants. )

____)

MEMORANDUM OPINION

The Internal Revenue Service (“IRS”) seeks dismissal of complaint filed by Kenneth

Dwayne Lockhart (the ““Debtor”) for lack of subject matter jurisdiction and for failure to state a

claim on which relief can be granted. Similarly, the Washington County (Ohio) Child Support

Enforcement Agency (“CSEA”) seeks summary judgement on behalf of itself and Washington

County, Ohio (the “County”). The movants argue that as arms of the federal and state governments,

they are entitled to sovereign immunity and the court accordingly lacks adequate subject matter

jurisdiction. Also, they argue that the collection activity at issue here involved non-estate property

or property otherwise excepted from the automatic stay.

The Debtor argues that under applicable provisions of the Bankruptcy Code, the parties

waived sovereign immunity and that their actions constituted a willful violation of the automatic

stay for which he is entitled to damages. In support of his argument, he contends that property

taken by the defendants was property of the estate which is not subject to an exception from the

automatic stay. Further, in Count II of the complaint Debtor asks the court to find defendants in

contempt for willfully violating the confirmation order.

For the reasons stated herein, the court will deny the IRS’s motion to dismiss for lack of

subject matter jurisdiction, but will grant the motion to dismiss for failure to state a claim upon

which relief can be granted and CSEA’s motion for summary judgment as to Count I. The court

will deny the motions as to Count II to allow for further proceedings.

I. STANDARD OF REVIEW

When adjudicating a motion to dismiss for lack of subject matter jurisdiction under Fed.

R. Civ. P. 12(b)(1), the “court should grant the Rule 12(b)(1) motion to dismiss ‘only if the material

jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of

law.’” Evans v. B. F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999) (citation omitted); Fed. R.

Bank. P. 7012(b). If any factual allegations are in dispute, the court may resolve the factual issues

in adjudicating the motion to dismiss. Wiles v. Wiles, Nos. 02-21206, 10-123, 2011 Bankr. LEXIS

139 (Bankr. N.D.W. Va. Jan. 19, 2011) (citing Thigpen v. United States, 800 F.2d 393, 396 (4th

Cir. 1986)).

Under Federal Rule of Civil Procedure 12(b)(6), a party may seek to dismiss a complaint

against it when the complaint fails “to state a claim upon which relief can be granted." Fed. R. Civ.

P. 12(b)(6); Fed. R. Bankr. P. 7012(b). When evaluating a motion to dismiss, the court must (1)

construe the complaint in a light favorable to the non-movant, (2) accept the factual allegations in

the complaint as true, and (3) draw all reasonable inferences in favor of the plaintiff. 2 Moore’s

Federal Practice – Civil § 12.34 (2018). After undertaking these steps, the claim for relief must

be “‘plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 570 (2007)). In determining a motion to dismiss, the court is not

adjudicating whether a plaintiff will ultimately prevail on the merits of the complaint; it is only

determining if the plaintiff is entitled to offer evidence to support the claims. Skinner v. Switzer,

562 U.S. 521, 529-30 (2011).

Federal Rule of Civil Procedure 56, made applicable to this proceeding by Federal Rule of

Bankruptcy Procedure 7056, provides that summary judgment is only appropriate if the movant

demonstrates “that there is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a); Celotex v. Catrett, 477 U.S. 317, 322 (1986).

Material facts are those which are necessary to establish a cause of action. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 248 (1986). In making this determination, “the evidence of the

nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.” Id. at 255.

Further, the court’s role is not “to weigh the evidence and determine the truth of the matter [but

to] determine whether there is a need for a trial.” Id. at 249-50. If no genuine issue of material fact

exists, the court has a duty to prevent claims and defenses not supported in fact from proceeding

to trial. Celotex Corp., 477 U.S. at 317, 323-24.

II. BACKGROUND

Debtor filed Chapter 13 bankruptcy on May 19, 2017, scheduling with his petition, among

other debts, his past-due child support then being collected by West Virginia Bureau of Child

Services (“WVBCSE”).1 On May 24, 2017, WVBCSE filed its proof of claim, claiming a total

amount due of $19,761.14, which the Debtor proposed to pay in full over the course of the 60-

month plan. At some point post-confirmation, the child relocated to Washington County, Ohio.

The Debtor still resides in West Virginia. Upon the child moving to Ohio, WVBCSE notified

CSEA of the Debtor’s child support obligation. The Debtor alleges that CSEA subsequently, with

knowledge of the Chapter 13 plan and confirmation order, coordinated with the U.S. Department

of the Treasury (“Treasury”) to intercept a $2,400 economic stimulus payment (“Stimulus”) to

which Debtor and his spouse were entitled as a result of the Coronavirus Aid, Relief, and Economic

Security Act (“CARES Act”).2 Specifically, the Treasury intercepted the Stimulus on May 22,

2020. 3

1 This action as it pertains to WVBCSE is addressed in a separate opinion. The IRS and CSEA make substantially

the same arguments in their defense and are addressed herein together.

2 According to the record before the court, the Treasury also offset $1,200 due and payable to Debtor’s spouse. To

the extent the spouse has not yet recovered that $1,200, they can accomplish it by filing an injured spouse claim. If

properly filed, the Treasury must remit these funds in accordance with 42 U.S.C. § 664(a)(3). This dispute involves

only the $1,200 to which the Debtor was entitled.

3 Debtor’s original complaint was unclear as to whether this amount was subsequently paid to CSEA or if it is still

being held by the IRS. CSEA’s motion states that the funds are on hold with the federal government in compliance

On September 18, 2020, Debtor filed this complaint seeking monetary loss among other

damages. In Count I, Debtor alleges a violation of the automatic stay. Debtor asks the court to hold

the defendants in contempt for violation of the confirmation order in Count II. The same week the

Debtor initiated this proceeding, CSEA mailed the Debtor a “Notice of Ohio Income Tax Refund

Offset For Overdue Support” (“Notice”). Debtor states this Notice constitutes a separate violation

of the stay. The complaint names CSEA and attaches the IRS as an indispensable party, neither of

whom were originally parties to the bankruptcy action but have been implicated in this complaint

by their alleged conduct.4 CSEA seeks summary judgment and IRS seeks to dismiss the action.

III. DISCUSSION

The IRS and CSEA seek dismissal and summary judgment of the Debtor’s adversary

complaint. Specifically, they first argue that they, as governmental entities, have sovereign

immunity that they have not expressly waived. The defendants further argue that the Stimulus was

a “refund” for the purposes of § 362(b)(2)(F) of the Bankruptcy Code such that its interception

was excepted from the automatic stay. CSEA also argues that the child support reporting system

is automatically administered and, to a certain degree, out of the agency’s control. CSEA states

that under the “Treasury Offset Program” (“TOP”), arrears are required by law to be submitted to

the State and any arrears owed to an obligee (in this case, Ethel Marcie Jackson) are then

automatically reported by the state for federal tax offset. Because of this, the motion alleges, any

decisions are made by the state of Ohio, not the individual counties or their agencies, and the only

determination by the county is the total amount of arrearage.

Debtor counters that the parties are not immune from suit, that the Stimulus was a “credit”

subject to the automatic stay, and that Notice from the state of Ohio amounted to an independent

attempt to collect which violated the stay.

A. IRS and CSEA waived sovereign immunity.

Defendants IRS and CSEA seek a determination that the complaint cannot go forward

based upon various bases. Because the defendants are similarly situated, their defenses are

with the 42 U.S.C. § 664 six-month holding period. There is no dispute that Debtor and his spouse were otherwise

legally entitled to the Stimulus payment.

4 To be clear, Debtor does not seek relief against IRS and alleges no wrongdoing through their actions. They are

attached only as an indispensable party to the complaint against CSEA because the IRS is currently holding the

$1,200 and only the IRS can release it.

essentially analogous, and the court will discuss them together. Parties argue that as government

entities, they have sovereign immunity and are not subject to suit. IRS asserts that the court lacks

subject matter jurisdiction over the action and dismissal is required without explicit consent to suit

or an instance of waiver. CSEA additionally makes this argument on behalf of the County. IRS

cites to United States v. Nordic Village in support of its position. 503 U.S. 30 (1980). Lastly, the

IRS argues that statutory authority for the offset—26 U.S.C. § 6402—precludes suit against the

agency. Debtor argues that Congress abrogated sovereign immunity in this context – prohibited

collection done actions taken with knowledge of the Debtor’s bankruptcy. The arguments put forth

by IRS and CSEA as to sovereign immunity miss the mark.

In 1992, the Supreme Court in Nordic Village held that § 106 of the Bankruptcy Code did

not establish an unequivocal textual waiver necessary to avoid the government’s sovereign

immunity in bankruptcy proceedings. 503 U.S. at 33-35. However, § 106 was amended in 1994 to

provide for express waiver of sovereign immunity by governmental units in a bankruptcy context

relating to monetary recovery, declaratory, and injunctive relief. Benson v. United States (In re

Benson), 566 B.R. 800 n.3 (Bankr. W.D. Va. 2017). Under the amended § 106, sovereign immunity

is abrogated with respect to § 362 of the Bankruptcy Code, among a multitude of other sections.

11 U.S.C. § 106(a).

At least as to states, there is an understanding within the realm of bankruptcy law that the

Bankruptcy Clause granted Congress the power to make a limited subrogation of sovereign

immunity in order to serve the fundamental purposes which are intertwined with bankruptcy. Cent.

Va. Cmty. College v. Katz, 546 U.S. 356, 362-63 (2006). As elaborated in Katz, the foundation of

bankruptcy in the colonies was riddled with the issue of one jurisdiction not acknowledging

another’s action of discharge. Id. at 366-67. The in rem nature of bankruptcy generally implicates

state interests far less than other kinds of jurisdiction. Tenn. Student Assistance Corp. v. Hood, 541

U.S. 440, 450 (2004). With these two considerations in mind, the Bankruptcy Clause was

effectuated with the intent “to give Congress the power to redress the rampant injustice resulting

from States’ refusal to respect one another’s discharge orders.” Katz, 546 U.S. at 377. Without

such, the fresh start of bankruptcy would be defeated for any debtor who conducts transactions

outside their state of domicile.

Here, it is clear Congress abrogated sovereign immunity by amending § 106 of the

Bankruptcy Code. Similarly, the court finds that 26 U.S.C. § 6402 does not proscribe this action.

The abrogation of immunity within § 106(a) acts as a specific waiver with respect to a number of

sections within Title 11 of the Bankruptcy Code. Within these applicable sections is the automatic

stay provisions of § 362, under which the Debtor brings this adversary proceeding. The court may

hear and determine any issue arising with respect to the application of such sections to

governmental units. § 106(a)(2). Where the IRS and CSEA are governmental units within the

meaning of this section, they have effectively waived immunity to which they may otherwise be

entitled outside of bankruptcy.

Additionally, this court finds IRS’s reliance upon Nordic Village to be misplaced. Nordic

Village has been explicitly superseded by the 1994 amendments to § 106.5 Through these

amendments, Congress has made explicitly clear its intention to “abrogate sovereign immunity

from bankruptcy causes of action for both the United States and the states, as to both nonmonetary

and monetary judgments, except punitive damages.” In re TWA, 261 B.R. 103, 114 (Bankr. D. Del.

2001) (citing Field v. Montgomery County (In re Anton Motors Inc.), 177 B.R. 58, 82 (Bankr. D.

Md. 1995); Benson, 566 B.R. at n.3.

IRS also relies upon § 6402 as a source of sovereign immunity. It contends that § 6402(g)

precludes review of this action such that the court must dismiss. Notably, however, its argument

in that regard is misplaced. As a general rule,

the Secretary, within the applicable period of limitations, may credit the amount of

such overpayment, including any interest allowed thereon, against any liability in

respect of an internal revenue tax on the party of the person who made the

overpayment and shall, subject to subsections (c), (d), (e), and (f), refund any

balance to such person.

26 U.S.C. § 6402(a). Subsection (c) further provides that the amount of any tax overpayment to be

refunded is to be “reduced by the amount of any past-due support owed by that person of which

the Secretary has been notified by a State in accordance with [past-due support collection

requirements].” 26 U.S.C. § 6402(c) (parentheticals omitted).6 Accordingly, the IRS has the ability

5 Further reliance upon sovereign immunity applications in non-bankruptcy contexts by IRS are irrelevant to this

discussion. Bankruptcy sits on a unique plane for reasons herein described and the tax cases upon which IRS relies

do not consider these implications, specifically the waiver of sovereign immunity in § 106. Katz, 546 U.S. at 373

(“Insofar as orders ancillary to the bankruptcy courts’ in rem jurisdiction, like orders directing turnover of

preferential transfers, implicate States’ sovereign immunity from suit, the States agreed in the plan of the

Convention not to assert that immunity.”).

6 Cross-reference to 42 U.S.C. § 664 states “past-due support” to mean “delinquency, determined under a court

order, or an order of an administrative process established under State law, for support and maintenance of a child

to “offset” tax refunds to which an individual is otherwise entitled against past-due support,

including child support.

Additionally, “No court of the United States shall have jurisdiction to hear any action,

whether legal or equitable, brought to restrain or review a reduction authorized by [these

subsections].” 26 U.S.C. § 6402(g). However, the section “explicitly reserves plaintiff’s ability to

sue agency-claimants directly, but it prohibits suits against the [Department of Treasury] merely

for carrying out its statutory obligation to collect debts that agencies refer to it.” Addison v. U.S.

Dep’t of Agric. (In re Addison), 533 B.R. 520, 524 (Bankr. W.D. Va. 2015) (citing Dasisa v. Dep’t

of Treasury, 951 F. Supp. 2d 45, 46 (D.D.C. 2013); 26 U.S.C. § 6402(g). Thus, suit against the

Treasury is precluded by this statute, but IRS’s reliance upon it to protect itself from suit is

misplaced.

Here, the court finds the foregoing to only preclude an action against the Treasury, not the

IRS. The Treasury is a federal department, whereas the IRS is one of the many agencies operating

underneath it. The court therefore finds that § 6402 does not preclude subject matter jurisdiction

because this suit is not one directly against the Treasury. Although the complaint alleges

coordination between CSEA and the Treasury, the Treasury is not a party to this action and

accordingly the mere fact that the offset falls within § 6402(a) does not preclude the jurisdiction

of this court to hear challenges to those collection efforts, specifically where they allegedly violate

the automatic stay.

Based upon the foregoing, there is no jurisdictional impediment preventing the court’s

consideration of this action.

B. The record requires further development for a ruling on contempt.

Because the parties devote the majority of their pleadings to Count I, the court finds it

necessary to dispose of the motions as to Count II before discussing the merits pertaining to the

automatic stay. Debtor argues that the defendants are in contempt by intercepting the funds rather

than waiting for payments as detailed in the plan. CSEA counters that it is not bound by the

(whether or not a minor), or of a child (whether or not a minor) and the parent with whom the child (whether or not a

minor) is living. §664(c).

confirmation order or, in the alternative, that the Stimulus was not property of the bankruptcy

estate.

Contempt is a violation of the confirmation order that the court may remedy pursuant to §

105 of the Bankruptcy Code. In re Walters, 868 F.2d 665, 669 (4th Cir. 1989). In order for the

court to hold a defendant in contempt, the movant must show by clear and convincing evidence:

(1) [T]he existence of a valid decree of which the alleged contemnor had actual or

constructive knowledge; (2) that the decree was in the movant’s “favor”; (3) that

the alleged contemnor by its conduct violated the terms of the decree, and had

knowledge (at least constructive knowledge) of such violations; and (4) that the

movant suffered harm as a result.

United States v. Under Seal (In re Grand Jury Subpoena), 597 F.3d 189, 202 (4th Cir. 2010)

(quoting Ashcraft v. Conoco, Inc., 218 F.3d 288, 301 (4th Cir. 2000)); see Fla. Dep’t of Revenue

v. Rodriguez (In re Rodriguez), 367 Fed. Appx. 25, 28 (11th Cir. 2010) (holding state of Florida

in contempt for violating the terms of debtor’s confirmed plan, even when the collection did not

violate the automatic stay because of the child support exception). The confirmed bankruptcy plan

binds the debtor and each creditor to its terms, whether or not the creditor is provided for in the

plan and regardless of whether the creditor has objected to, accepted, or rejected the plan. 11 U.S.C.

§ 1327(a).

Defendants do not dispute that the confirmation order was validly entered, but the

examination includes several factual matters that are unresolved. First, seemingly neither CSEA

nor IRS had constructive knowledge of Debtor’s case because they are not parties to the case.

Regarding actual knowledge, CSEA concedes it was aware of the bankruptcy, but its concession

does not explicitly include whether it knew of the specific terms of the court’s confirmation order.

Debtor alleges that CSEA had actual knowledge of the plan, but CSEA fails to address the matter

expressly in its pleadings. IRS cites the exact date the confirmation order was entered within its

motion, but there is not a conclusive concession or rejection that either defendant was aware of the

plan at the time of the alleged actions taken. It appears quite clear to the court that the parties had

some degree of awareness of the Debtor’s bankruptcy, but the extent is not clear and not

sufficiently determined by the pleadings. As set forth above, actual or constructive knowledge is

material.

The court finds the foregoing sufficient to deny CSEA’s and IRS’s motions, but it would

be remiss if it did not also note that the Debtor himself was not following the terms of the plan.7

In any event, it is clear to the court there are still factual matters in dispute precluding summary

judgement or dismissal as to Count II. Accordingly, the court will deny defendants’ motions as to

Count II and order further proceedings on the issue of contempt.

C. The Stimulus payment is a tax refund and is excepted from the automatic stay

under 11 U.S.C. § 362(b)(2)(F).

Critical to the parties’ dispute is whether the Stimulus is a tax refund or credit. IRS and

CSEA contend that the Debtor’s claim fails because the Stimulus is an advance refund subject to

exception from the automatic stay. To support this position, they cite Treasury and IRS guidance.

CSEA additionally argues that the Debtor suffered no actual harm, because the interception

resulted in a dollar-for-dollar reduction in the Debtor’s arrearage in support payments. The Debtor

cites language within 26 U.S.C. § 6428 to attempt to classify the payment as a credit rather than a

refund. As a credit, he claims the exception in § 362(b)(2)(F) is inoperable. He supports this

proposition by baldly claiming that the automatic stay and the confirmation order supersede the

CARES Act and Treasury Offset Program (“TOP”) statutory authority.8

Section 362 of the Bankruptcy Code is effective upon petition filing and operates as a

breathing spell from collection attempts. The stay is automatic and applicable to all entities to stay

all collection actions outside of the bankruptcy forum. City of Chicago v. Fulton, 141 S. Ct. 585,

589 (2021). However, it comes with a plethora of exceptions. Section 362(b)(2)(F) is one such

exception, providing for non-applicability of the stay for the interception of a tax refund. Few

courts have analyzed this provision, but the court in In re Dougherty-Kelsay held generally that

neither the interception of a refund for a child support arrearage, nor the retention of those funds

7 Upon review of the docket, it is apparent the Debtor has only intermittingly performed, having twice resolved

motions by the Chapter 13 Trustee to dismiss for failure to maintain plan payments. Also, CSEA asserts that

contrary to the terms of the plan, Debtor was $1,699.03 in arrears in child support payments as of April 2021.

8 The parties additionally argue over whether the refund is property of the estate. Based on this court’s disposition,

this argument is immaterial because the Stimulus is excepted from the automatic stay for reasons stated herein.

constituted a violation of the automatic stay. 601 B.R. 426, 444 (Bankr. E.D. Ky. 2019).9 That, of

course, was before COVID-19 and did not involve a stimulus payment.

Importantly, the exception in § 362(b)(2)(F) applies only to refunds. Tax credits, which are

dollar-for-dollar reductions in owed taxes, are distinctly different from refunds because they are

applied before the calculation of a refund. Only if the application of credits results in overpayment

of taxes will there be a refund subject to offset under TOP. The statutory framework for TOP

explicitly states “the amount of any overpayment to be refunded to the person shall be reduced by

the amount of any past-due support . . . .” 11 U.S.C. § 6402 (emphasis added). This overpayment

would result after application of any credits. Accordingly, TOP intercepts the resulting refund, not

any tax credit applied to calculate the refund.

Regarding whether the Stimulus qualifies as a refund, the Treasury website indicates “[t]he

amount you receive for the Recovery Rebate Credit will be included as part of your refund or

applied to any tax owed. If you owe debts to the United States or certain state agencies, your tax

refund may be reduced to pay those debts.” (emphasis added).10 More specifically, the IRS website

explicitly states “Your [Economic Impact] Payment will be offset if you owe past-due child

support.” Butler v. CHFS, No. CV 6:20-234-WOB, 2020 WL 7322717 at *2 (E.D. Ky. Dec. 11,

2020).11

Additionally, several non-bankruptcy courts have recently ruled that an offset in similar

circumstances was valid where a father owing child support contested the interception of their

stimulus payment.

By its terms, the CARES Act, Pub. L. 116-136 (Mar. 27, 2020), expressly provides

that the “economic impact payment” of $1,200.00 per person cannot be offset

9 The court in reading the plain language of the subsection further opined that “[u]nlike other stay exceptions, §

362(b)(2)(F) does not limit its applicability to non-estate property.” In re Doughtery-Kelsay, 601 B.R. at 444.

Additional unpublished authority has come to the same conclusion. See Chapter 7 Tr. v. Texas (In re Good), 2013

Bankr. LEXIS 3867 (Bankr. E.D. Tex. Sep. 17, 2013) (Granting summary judgement for Texas in action alleging a

violation of the automatic stay when the state intercepted debtor’s federal tax refund to pay delinquent, post-petition

child support obligations); In re Wills, 2009 Bankr. LEXIS 2311 (Bankr. D. Neb. Aug. 11, 2009) (Debtor’s motion

for return of seized tax return to pay delinquent domestic support denied under § 362(b)(2)(F)).

10 https://fiscal.treasury.gov/top/faqs-for-the-public-covid-19.html (“The Economic Impact Payment under the

CARES Act can be offset through TOP only to collect delinquent child support obligations that have been referred

by the state to TOP.”).

11 See https://www.irs.gov/newroom/questions-and-answers-about-the-first-economic-impact-payment-topic-d-

receiving-my-payment.

against the kinds of debts expressly identified in Section 2201(d)(1) to (d)(3) of the

Act. However, child support obligations are not one of the debts excepted from

setoff. Accordingly, the stimulus payment can be garnished to pay past-due child

support pursuant to Section 464 of the Social Security Act and Section 6402(c) of

the Internal Revenue Code.

Treadwell v. Mnunchin, No. 2:21-CV-1028, 2021 WL 1734338 at *3 (S.D. Ohio May 3, 2021)

(emphasis added); see Butler, 2020 WL 7322717 at *1; Ortiz-Rivas v. Mnunchin, No. 20-CV-

1844-pp, 2021 WL 1400931 at *4 (E.D. Wis. Apr. 14, 2021), appeal docketed, No. 21-1887 (7th

Cir. May 18, 2021). In the cases cited above, state inmates filed suit when CARES Act payments

they were otherwise entitled to were intercepted and applied to their delinquent child support debt.

All suits were dismissed, with the Butler court explicitly holding the Stimulus could be garnished

to pay past-due child support under § 6402(c) and dismissing with prejudice.

Debtor’s reliance on the use of “advance credit” in 26 U.S.C. § 6428 terminology as an

“advance credit” to support his position is misplaced. Not only does the same section also use the

terms “advance refund” and “advance refunds of credit,” but the effective result of the section is

the equivalent of a $1200 (or $2,400 for joint filers) overpayment. An overpayment results in a

refund, which is subject to TOP interception. Accordingly, although the payments in question have

just recently arose as a response to the pandemic and their treatment may be questioned, this court

finds that the interception of these payments in accordance with TOP was plainly valid.

While the federal agencies in charge of administering the payments appear to use “credit”

and “refund” interchangeably, there is explicit language indicating that it was subject to federal

offset for child support arrearages. Because the CARES Act and the Treasury website explicitly

state that the payment is subject to offset for child support owed, and consistent with the non-

bankruptcy authority above, it follows that the Stimulus is more appropriately characterized as a

refund. The Debtor points to no authority which would support an argument that the plain language

of the § 362(b)(2)(F) exception does not mean what it says—that the stay does not operate as to

“the interception of a tax refund”—and that the Stimulus qualifies as a refund. As a refund, §

362(b)(2)(F) excepts the interception from the automatic stay.

D. Notice received from the state of Ohio did not constitute a violation of the

automatic stay.

Finally, Debtor contends that even if the interception of his Stimulus did not violate the

automatic stay, CSEA’s Notice, which he received the same week he filed this complaint,

constitutes a violation on its own. In support of this position, Debtor makes comparison to the facts

in Flint v. West Virginia State Tax Dep’t, 557 B.R. 461 (Bankr. N.D. W. Va. 2016). CSEA

responds that while the Notice lists CSEA as the return address, it was sent directly by the state of

Ohio, as required by 42 U.S.C. § 666(a)(3)(A).

A creditor which provides notice that has an informative purpose, rather than one

amounting to an attempt to collect, does not violate the automatic stay. See In re Crespo Torres,

532 B.R. 195, 202 (Bankr. D. P.R. 2015) (letter notifying the debtor that account had been sold

and payments should be directed to new account holder did not violate the stay); In re Sciortino,

561 B.R. 569, 579 (Bankr. N.D. Ga. 2016) (mailing a letter with no language indicating adverse

consequences in event of nonpayment and provided for an informational purpose does not violate

the stay). 42 U.S.C. § 666(a)(3)(A) provides that a state shall ensure notice of an offset is sent to

the noncustodial parent to ensure they are given an ability to contest it.

Debtor’s reliance upon Flint is misplaced for two reasons. First, the debtors had already

received discharge, and the case dealt with a collection attempt of discharged debts, rather than a

violation of the automatic stay. Id. at 465. Second, a violation was found based on the language in

a mailed “Statement of Account” which made reference to “interest and penalties,” stated that

“[p]ayment must be made on or before the Pay By Date or additional penalties will continue to

accrue,” and included a statement that the notice constituted a “lien upon all property of the

taxpayer.” Id. at 464. This language far exceeds that of the Notice sent by CSEA (or the state of

Ohio on behalf of CSEA) notifying Debtor that his owed child support was subject to interception

of his Ohio income tax refund and that this decision was subject to review.12

The facts here indicate an informative, rather than harassing purpose, and fail to amount to

a violation of the stay. The closest thing to harassing language within the Notice is the statement

“if you miss any further payments which add to your support debt, these amounts will also be

subject to similar Ohio income tax intercepts.” This language reminds the Debtor of his duty to

pay, but does not amount to a collection attempt. Nor does it provide any true threat for payment,

as Debtor is a West Virginia resident and is not entitled to an Ohio tax refund. Rather, the Notice

is the result of the state of Ohio complying with § 666(a)(3)(A) and ensuring that the Debtor had

12 Debtor concedes that as a West Virginia resident he is not entitled to an Ohio income tax refund.

adequate notice of the offset. This court finds within the Notice no harassing language which

indicates an attempt to collect that would render it a violation of the automatic stay.

IV. CONCLUSION

For the foregoing reasons, the court finds it appropriate to find in favor of movants on

Count I and in favor of the Debtor on Count II. The court will deny IRS’s motion to dismiss for

lack of subject matter jurisdiction, but consistent with Fed. R. Civ. P. 58, made applicable by Fed.

R. Bankr. P. 7058, the court will enter separate orders granting the IRS’s motion to dismiss for

failure to state a claim upon which relief can be granted and CSEA’s motion for summary judgment

as to Count I. Defendants’ motions as to the contempt claims of Count II are denied and the court

will set further proceedings on the matter.