B-123016 April 11, 1955

B-123016: Apr 11, 1955

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Lujan: Reference is made to letter dated December 21. Requesting that this office cease making demands upon you for the balance of disability compensation over-payments made to you by the Veterans Administration on the ground that your indebtedness by reason of the overpayments was discharged in bankruptcy. Which was applied on the indebtedness. The demands were made upon you incident to filing. Prior to receipt of advise from the Department of Justice that the bankruptcy proceedings were closed as a no asset case. Since it appears that any remaining indebtedness to the Government was discharged in the bankruptcy proceedings. No further demands will be made upon you for the discharged indebtedness.

B-123016 April 11, 1955

Mr. Michael Thomas Lujan c/o Mr. Thomas M. Hunt, Attorney at Law Heskes Building, 831 H Street Sacramento 14, California

Dear Mr. Lujan:

Reference is made to letter dated December 21, 1954, written in your behalf by Mr. Hunt, requesting that this office cease making demands upon you for the balance of disability compensation over-payments made to you by the Veterans Administration on the ground that your indebtedness by reason of the overpayments was discharged in bankruptcy. He also requests that the proceeds of tax refund check No. 16,496,051 dated April 25, 1951, for $58.26 drawn to your order and that of your divorced wife, which was applied on the indebtedness, be forwarded to you.

The demands were made upon you incident to filing, in the bankruptcy proceeding, proof of the Government's claim, and prior to receipt of advise from the Department of Justice that the bankruptcy proceedings were closed as a no asset case. Since it appears that any remaining indebtedness to the Government was discharged in the bankruptcy proceedings, no further demands will be made upon you for the discharged indebtedness.

Regarding you claim for the proceeds of the check, section 68(a) of the Bankruptcy Act, 52 Stat. 878, 11 U.S.C. 108(a), provides that "In all cases of mutual debts or mutual credits between the estate of a bankrupt and a creditor the account shall be stated and one debt shall be set off against the other, and the balance only shall be allowed or paid." In 6 Am. Jur. (RevEd), Bankruptcy, section 516, it is stated that "Generally speaking, to establish mutuality warranting a setoff under the Bankruptcy Act, the debts or credits must exist at the time of the filing of the Petition in bankruptcy." The record clearly shows that your interest in the check existed at the time the petition in bankruptcy was filed and therefore was available for setoff against your indebtedness to the United States. See 18 Comp. Gen. 301. Accordingly, your claim for the proceeds of the check may not be allowed.

Very truly yours,

FRANK H. WEITZEL Assistant Comptroller General of the United States