Setoff of Discharged Debt

The Florida National Guard Bureau asked whether an unliquidated travel advance that was scheduled as a debt and discharged in a bankruptcy proceeding might be setoff against an employee claim that arose subsequent to the bankruptcy discharge. The employee was given a travel allowance incident to his transfer from Delaware to Florida. He was advised that he should repay the unliquidated portion of this travel allowance. The employee filed for and was granted a Discharge of Bankruptcy. During the bankruptcy proceedings, the National Guard Bureau filed a claim alleging that it was entitled to priority for payment of the employee's debt to the Government. The claim was dismissed and the National Guard Bureau took no further action. The employee later filed a claim with the National Guard Bureau for settlement expenses incident to the sale of his resident at his old duty station. The National Guard paid the employee the settlement expenses less the amount due for the unliquidated travel expenses. GAO held that the employee's debt to the Government was scheduled and released by the bankruptcy discharge and could no longer be collected. The reimbursement claim for the sale of his residence was not available to be setoff against the earlier unliquidated advance. It had no connection with the bankruptcy proceeding, and was not an asset of the bankrupt's estate. Therefore, GAO held that the unliquidated portion of the travel advance could not be setoff against the new claim, and the full amount of the new claim should be paid.