B-28356, OCTOBER 8, 1942, 22 COMP. GEN. 330

B-28356, OCTOBER 8, 1942, 22 COMP. GEN. 330

BANKRUPTCY AND CIVIL-SERVICE RETIREMENT FUND MONEYS IN THE CIVIL-SERVICE RETIREMENT AND DISABILITY FUND OF A PERSON WHO AT THE TIME OF HIS FILING OF A PETITION IN BANKRUPTCY, AND SINCE, IS EMPLOYED IN A POSITION WITHIN THE PURVIEW OF THE CIVIL RETIREMENT ACT OF MAY 22, 1920, AS AMENDED, DO NOT BECOME PART OF HIS ESTATE IN THE BANKRUPTCY PROCEEDINGS. A DISCHARGE IN BANKRUPTCY OF A GOVERNMENT EMPLOYEE FROM A NOTE SECURING A LOAN INDEBTEDNESS TO A PRIVATE CREDITOR WHICH WAS LISTED ON THE BANKRUPT'S SCHEDULE OF LIABILITIES AND ASSIGNED TO THE UNITED STATES SUBSEQUENT TO THE FILING OF THE PETITION IN BANKRUPTCY UPON PAYMENT BY THE FEDERAL HOUSING ADMINISTRATION OF ITS OBLIGATION AS INSURER OF THE LOAN AFFORDS THE BANKRUPT A COMPLETE LEGAL DEFENSE TO ANY ACTION BROUGHT BY THE UNITED STATES TO RECOVER SUCH DEBT, THUS PRECLUDING THE EARMARKING OF THE MONEYS TO THE CREDIT OF THE EMPLOYEE IN THE CIVIL-SERVICE RETIREMENT FUND FOR THE PURPOSE OF SETTING OFF THE AMOUNT OF THE GOVERNMENT'S LOSS AGAINST MONEYS TO BE PAID FROM SUCH FUND AT SOME FUTURE DATE. IT IS FOR ADMINISTRATIVE CONSIDERATION WHETHER IT IS IN THE INTEREST OF THE UNITED STATES TO CONTINUE IN ITS EMPLOYMENT A GOVERNMENT EMPLOYEE WHO REFUSES TO MAKE GOOD A LOSS TO THE GOVERNMENT RESULTING FROM HIS DISCHARGE IN BANKRUPTCY.

COMPTROLLER GENERAL WARREN TO THE NATIONAL HOUSING ADMINISTRATOR, OCTOBER 8, 1942:

I HAVE A LETTER DATED AUGUST 21, 1942, FROM THE ASSISTANT COMMISSIONER, FEDERAL HOUSING ADMINISTRATION, AS FOLLOWS:

IN REPLY REFER TO: MCP NO. 617858, CHARLES AND BERTHA KESSLER, 916 WEST MADISON AVENUE, HYATTSVILLE, MARYLAND.

WE HAVE FOR CONSIDERATION THE CASE OF CHARLES R. KESSLER AND BERTHA V. KESSLER OF 916 WEST MADISON AVENUE, HYATTSVILLE, MARYLAND, IN WHICH THIS ADMINISTRATION REIMBURSED THE COMMERCIAL INVESTMENT TRUST INCORPORATED OF NEW YORK, N.Y., BECAUSE OF A CLAIM THIS INSTITUTION FILED UNDER ITS CONTRACT OF INSURANCE WITH THIS ADMINISTRATION, DUE TO THE DEFAULT OF THE BORROWERS ON A LOAN SECURED UNDER TITLE I REGULATIONS OF THE NATIONAL HOUSING ACT.

THE NOTE EXECUTED IN THIS TRANSACTION IS DATED NOVEMBER 30, 1939. MARCH 2, 1941, THE NOTE WENT INTO DEFAULT AND SUBSEQUENTLY CHARLES R. KESSLER FILED A PETITION IN BANKRUPTCY AND WAS ADJUDICATED A BANKRUPT ON MAY 16, 1941. THE FIRST MEETING OF THE BANKRUPT CREDITORS WAS HELD JUNE 24, 1941, AND MR. KESSLER RECEIVED HIS DISCHARGE ON JULY 8. THE LAST DAY SET FOR FILING OBJECTIONS TO THE BANKRUPT'S DISCHARGE WAS AUGUST 4, 1941. THE LAST DATE FOR FILING PROOF OF CLAIM AGAINST THE BANKRUPT'S ESTATE WAS SIX MONTHS FROM THE DATE OF THE FIRST MEETING, OR DECEMBER 24, 1941.

THE COMMERCIAL INVESTMENT TRUST INCORPORATED FILED CLAIM WITH THIS ADMINISTRATION ON THIS TRANSACTION ON SEPTEMBER 2, 1941 AND WE REIMBURSED THEM ON SEPTEMBER 25, 1941, AT WHICH TIME ALL RIGHT, TITLE AND INTEREST IN THE NOTE EXECUTED BY CHARLES AND BERTHA KESSLER WERE ASSIGNED TO THE UNITED STATES OF AMERICA.

CHARLES R. KESSLER IS PRESENTLY EMPLOYED BY THE UNITED STATES POST OFFICE DEPARTMENT, WASHINGTON, D.C., AS A CLERK AND HAS BEEN EMPLOYED IN THAT POSITION FOR APPROXIMATELY 14 YEARS. EVENTUALLY MR. KESSLER WILL BE ELIGIBLE FOR ANNUITY PAYMENTS, OR REFUND UNDER THE CIVIL SERVICE RETIREMENT ACT.

IN ACCORDANCE WITH OUR POLICY ON OCTOBER 27, 1941, WE INFORMED THE CIVIL SERVICE COMMISSION OF OUR CLAIM AGAINST THIS ANNUITANT AND REQUESTED THAT A " SET-OFF" BE MADE, SHOULD A CLAIM FOR ANNUITY OR REFUND OF DEDUCTIONS BE FILED BY MR. KESSLER.

IT IS THE OPINION OF MR. KESSLER'S ATTORNEY THAT THIS ADMINISTRATION DOES NOT HOLD VALID SECURITY THAT WOULD PERMIT A CLAIM AGAINST MR. KESSLER'S RETIREMENT ANNUITY FUND, BECAUSE HE CONTENDS THAT THE NOTE CAME INTO OUR POSSESSION SUBSEQUENT TO THE DATE OF MR. KESSLER'S DISCHARGE IN BANKRUPTCY, AND ALSO SINCE THIS OBLIGATION WAS LISTED IN THE BANKRUPT'S SCHEDULE OF LIABILITIES.

IN PREVIOUS CASES WHERE AN EMPLOYEE IS ELIGIBLE FOR ANNUITY AND THE EMPLOYEE HAS BEEN DISCHARGED IN BANKRUPTCY, SUBSEQUENT TO THE DATE WE REIMBURSED THE FINANCIAL INSTITUTION UNDER THE REGULATIONS OF THE NATIONAL HOUSING ACT, THE CIVIL SERVICE COMMISSION HAS TAKEN THE POSITION THAT THE EMPLOYEE IS NOT RELIEVED FROM THE ATTACHMENT OF HIS RETIREMENT AND ANNUITY FUND, AS THIS FUND IS NOT SCHEDULED BY THE BANKRUPT AS AN ASSET AND CANNOT BE ATTACHED FOR DISTRIBUTION TO CREDITORS. THE CIVIL SERVICE COMMISSION DOES NOT APPEAR TO HAVE AN ESTABLISHED RULE CONCERNING THE INSTANT CASE.

THE ATTACHED FILE IS THEREFORE REFERRED TO YOU FOR YOUR CONSIDERATION AND IT WOULD BE APPRECIATED IF A DECISION WOULD BE RENDERED CONCERNING THIS ADMINISTRATION'S RIGHT TO PLACE A SAFE-GUARD ON THE RETIREMENT AND ANNUITY FUND OF MR. KESSLER.

IT WOULD APPEAR THAT THE AUTHORITY TO SET OFF THE OBLIGATION IN QUESTION RESTS UPON TWO PROPOSITIONS: (1) THAT MONEYS IN THE RETIREMENT FUND DEDUCTED FROM THE SALARY, PAY, OR COMPENSATION OF AN EMPLOYEE PURSUANT TO THE CIVIL RETIREMENT ACT OF MAY 22, 1920, AS AMENDED, 5 U.S.C. 691, ET SEQ. DO NOT BECOME PART OF THE BANKRUPT ESTATE; AND (2) IN THE EVENT SAID PROPOSITION IS TENABLE, THAT THE GOVERNMENT POSSESSES A VALID AND ENFORCEABLE CLAIM IN THE AMOUNT OF ITS LOSS AGAINST MR. KESSLER AT SUCH TIME AS MONEYS TO HIS CREDIT IN THE RETIREMENT FUND BECOME DUE AND PAYABLE.

THE CIVIL RETIREMENT ACT, AS AMENDED BY THE ACT OF MAY 29, 1930, 46 STAT. 475, 5 U.S.C. 719, MAKES COMPULSORY CERTAIN DEDUCTIONS FROM THE PAY OF EMPLOYEES WHO COME WITHIN THE PURVIEW OF THE ACT, AND REQUIRES THAT THE AMOUNTS SO DEDUCTED BE DEPOSITED INTO THE TREASURY OF THE UNITED STATES TO THE CREDIT OF THE "CIVIL-SERVICE RETIREMENT AND DISABILITY FUND.' REFUNDS PRIOR TO RETIREMENT ARE AUTHORIZED ONLY IN THE EVENT OF ABSOLUTE SEPARATION FROM THE SERVICE OR TRANSFER TO A POSITION NOT WITHIN THE PURVIEW OF THE ACT, AND, EVEN THEN, IN THE CASE OF EMPLOYEES WITH 5 OR MORE YEARS OF SERVICE, ONLY TO THE EXTENT OF AMOUNTS DEDUCTED PRIOR TO JANUARY 24, 1942. SEE 21 COMP. GEN. 1000, 1002, 5 U.S.C. 724, AS AMENDED.

SECTION 18 OF THE AMENDATORY ACT OF MAY 29, 1930, 46 STAT. 479, 5 U.S.C. 729, EXPRESSLY PROVIDES THAT:

NONE OF THE MONEYS MENTIONED IN THIS CHAPTER SHALL BE ASSIGNABLE, EITHER IN LAW OR EQUITY, OR BE SUBJECT TO EXECUTION, LEVY, OR ATTACHMENT, GARNISHMENT, OR OTHER LEGAL PROCESS.

IT DOES NOT APPEAR THAT MR. KESSLER BECAME SEPARATED FROM THE FEDERAL SERVICE, OR HAD BEEN TRANSFERRED TO A POSITION NOT WITHIN THE PURVIEW OF THE CIVIL RETIREMENT ACT, PRIOR TO HIS ADJUDICATION AS A BANKRUPT, OR SINCE. SUCH STATUTORY CONDITIONS NOT HAVING BEEN MET, HE COULD NOT HAVE OBTAINED A REFUND OF ANY PART OF HIS RETIREMENT DEDUCTIONS. FURTHERMORE, IN VIEW OF THE PROVISION ABOVE QUOTED, HE COULD NOT HAVE ASSIGNED THEM AND THEY COULD NOT HAVE BEEN REACHED BY HIS CREDITORS UNDER ANY LEGAL PROCESS.

SECTION 70 (A) OF THE BANKRUPTCY ACT, AS AMENDED, 11 U.S.C. 110, PROVIDES:

THE TRUSTEE OF THE ESTATE OF A BANKRUPT * * * SHALL IN TURN BE VESTED BY OPERATION OF LAW WITH THE TITLE OF THE BANKRUPT, AS OF THE DATE OF THE FILING OF THE PETITION IN BANKRUPTCY OR OF THE ORIGINAL PETITION PROPOSING AN ARRANGEMENT OR PLAN UNDER THIS TITLE, EXCEPT INSOFAR AS IT IS TO PROPERTY WHICH IS HELD TO BE EXEMPT, TO ALL * * * (3) POWERS WHICH HE MIGHT HAVE EXERCISED FOR HIS OWN BENEFIT, BUT NOT THOSE WHICH HE MIGHT HAVE EXERCISED SOLELY FOR SOME OTHER PERSON * * * (5) PROPERTY, INCLUDING RIGHTS OF ACTION, WHICH PRIOR TO THE FILING OF THE PETITION HE COULD BY ANY MEANS HAVE TRANSFERRED OR WHICH MIGHT HAVE BEEN LEVIED UPON AND SOLD UNDER JUDICIAL PROCESS AGAINST HIM * * *. ( ITALICS SUPPLIED.)

THE BANKRUPT COULD HAVE RESIGNED FROM HIS FEDERAL POSITION AT THE TIME OF THE SAID BANKRUPTCY PROCEEDINGS, AND THUS COULD HAVE PERFECTED A RIGHT TO A REFUND OF HIS RETIREMENT DEDUCTIONS UNDER THE LAW IN EFFECT AT THAT TIME. BUT, OBVIOUSLY, THE PERSONAL PREROGATIVE OF RESIGNING IS NOT A ,POWER" WHICH IN ANY EVENT COULD BE EXERCISED FOR THE BANKRUPT BY THE TRUSTEE AND, HENCE, WOULD NOT BE A POWER VESTING IN THE TRUSTEE UNDER THE SAID PROVISION OF SECTION 70 (A) (3) OF THE BANKRUPTCY ACT. AND AS THE CIVIL RETIREMENT ACT EXPRESSLY PROHIBITS ASSIGNMENT OF THE FUNDS DEPOSITED IN THE TREASURY AND PLACES THEM BEYOND LEVY OR OTHER LEGAL PROCESS, THEY COULD NOT HAVE BEEN TRANSFERRED BY THE BANKRUPT OR LEVIED UPON AND SOLD UNDER JUDICIAL PROCESS, AND, HENCE, DO NOT COME WITHIN THE PROVISIONS OF SECTION 70 (A) (5).

THAT AN INCHOATE RIGHT WHICH COULD BE PERFECTED ONLY BY THE PERSONAL ACTION OF THE BANKRUPT COULD NOT BE ENFORCED BY THE TRUSTEE, SEE IN RE FURNESS, 75 F./2D) 965. CF. HULL V. FARMERS LOAN AND TRUST CO., 245 U.S. 312. THAT GOVERNMENTAL PENSIONS AND SALARIES ARE NOT AFFECTED BY PROCEEDINGS IN BANKRUPTCY, SEE FISHER V. CUSHMAN, 103 F. 860, 863. SEE, ALSO, AUDUBON V. SHUFELT, 181 U.S. 575. THAT PROPERTY NOT SUBJECT TO BE TAKEN UNDER PROCESS FOR ENFORCEMENT OF A DEMAND IS ,EXEMPT" WITHIN THE MEANING OF SECTION 70 (A) OF THE BANKRUPTCY ACT EXCLUDING EXEMPT PROPERTY FROM THE PROVISION VESTING THE TRUSTEE WITH TITLE, SEE STRATTON V. ERMIS, 268 F. 533. THAT THE WORDS ,EXCEPT INSOFAR AS IT IS TO PROPERTY WHICH IS HELD TO BE EXEMPT" ARE A QUALIFICATION THAT EXCLUDES EXEMPT PROPERTY FROM ALL THE PROVISIONS CONTAINED IN THE RESPECTIVE ENUMERATIONS IN THE OTHER CLAUSES OF SECTION 70 (A) OF THE BANKRUPTCY ACT, SEE HOLDEN V. STRATTON, 198 U.S. 202. THAT IT WAS THE INTENTION OF THE CONGRESS THAT PROPERTY SHOULD NOT PASS TO THE TRUSTEE WHICH COULD NOT BE THE SUBJECT OF CONVEYANCE OR DISPOSITION BY THE BANKRUPT AT THE TIME THE BANKRUPTCY PROCEEDINGS WERE INAUGURATED, SEE HESSELTINE V. PRINCE, 95 F. 802; IN RE RUSSIE, 96 F. 609; IN RE COHN, 171 F. 568; OLMSTEAD-1STEVENSON CO. V. MILLER, 231 F. 69. THAT FEDERAL STATUTES EXEMPTING MONEY DUE ANY PENSIONER FROM ATTACHMENT, LEVY, OR SEIZURE BY OR UNDER ANY LEGAL OR EQUITABLE PROCESS, PROTECT THE FUNDS UNTIL THEY HAVE COME SAFELY INTO THE HANDS OF THE PENSIONER, ALTHOUGH PENSION MONEY RECEIVED AND INVESTED OR ACTUALLY IN THE HANDS OF A BANKRUPT AT THE TIME OF ADJUDICATION IS NOT EXEMPT, SEE IN RE BEAN, 100 F. 262; IN RE STOUT, 109 F. 794; IN RE JONES, 166 F. 337. IN THIS LATTER CONNECTION, SEE, ALSO, LAWRENCE V. SHAW, 300 U.S. 245. CF. CARRIER V. BRYANT, 306 U.S. 545.

IN VIEW OF THE STATUTORY PROVISIONS AND JUDICIAL PRECEDENTS, SUPRA, THE CONCLUSION APPEARS JUSTIFIED THAT MONEYS IN THE RETIREMENT FUND OF AN EMPLOYEE WHOSE POSITION IS WITHIN THE PURVIEW OF THE CIVIL RETIREMENT ACT, SUPRA, AND WHO CONTINUES IN THAT POSITION--- OR OTHER POSITION LIKEWISE UNDER THE ACT--- DO NOT BECOME PART OF HIS ESTATE IN BANKRUPTCY PROCEEDINGS. CONSEQUENTLY, SUCH MONEYS AS MAY BE IN SAID FUND REMAIN AVAILABLE FOR PAYMENT TO MR. KESSLER OR HIS BENEFICIARIES IN ACCORDANCE WITH APPLICABLE PROVISIONS OF LAW OR FOR SET-OFF AGAINST DEBTS OWNED BY THE EMPLOYEE TO THE UNITED STATES. SEE 21 COMP. GEN. 1000, AND CASES CITED THEREIN.

THE LOAN TO MR. KESSLER BY THE COMMERCIAL INVESTMENT TRUST, INCORPORATED, WAS INSURED BY THE FEDERAL HOUSING ADMINISTRATION PURSUANT TO TITLE I OF THE NATIONAL HOUSING ACT, AS AMENDED, 12 U.S.C. 1701, ET SEQ. IT APPEARS FROM THE CHRONOLOGY OF EVENTS STATED IN THE SECOND PARAGRAPH OF THE ASSISTANT COMMISSIONER'S LETTER, SUPRA, THAT IT WAS NOT UNTIL SEVERAL MONTHS AFTER DEFAULT ON THE NOTE AND THE FILING OF A PETITION IN BANKRUPTCY BY THE MAKER THEREOF THAT THE ADMINISTRATION WAS CALLED UPON BY THE LENDING INSTITUTION TO INDEMNIFY ITS LOSS. IT IS ON THIS LATTER DATE THAT THE ADMINISTRATION TOOK AN ASSIGNMENT OF THE NOTE UPON WHICH THE LOSS WAS INCURRED. THE COURTS UNIFORMLY HAVE HELD UNDER SUCH CIRCUMSTANCES THAT SINCE THE RIGHTS OF CREDITORS ARE FIXED BY THE BANKRUPTCY ACT AS OF THE DATE OF FILING OF THE PETITION IN BANKRUPTCY, THE OBLIGATION IS NOT A DEBT OF THE UNITED STATES BUT ONE DUE A PRIVATE INSTITUTION SO FAR AS ITS STATUS IN THE BANKRUPTCY PROCEEDINGS IS CONCERNED. THE SUBSEQUENT ASSIGNMENT OF THE NOTE TO THE FEDERAL HOUSING ADMINISTRATION PASSED ONLY SUCH RIGHTS AS THE ASSIGNOR POSSESSED, WHICH IN THE INSTANT CASE WAS THE RIGHT TO FILE PROOF OF CLAIM AS A GENERAL CREDITOR OF THE BANKRUPT ESTATE. UNITED STATES V. MARXEN, TRUSTEE, 307 U.S. 200; FEDERAL HOUSING ADMINISTRATOR V. MOORE, 90 F. (2D) 32; IN RE HANSEN BAKERIES, 103 F./2D) 665; IN RE MILLER, 105 F./2D) 926. CF. KORMAN, TRUSTEE V. FEDERAL HOUSING ADMINISTRATOR, 113 F./2D) 743.

APPARENTLY, THE DEBT WAS LISTED ON THE BANKRUPT'S SCHEDULE OF LIABILITIES AND NOTICE WAS DULY GIVEN THE COMMERCIAL INVESTMENT TRUST, INCORPORATED, OF THE FIRST MEETING OF CREDITORS. IT IS STATED THAT SUBSEQUENTLY THE BANKRUPT WAS GRANTED A DISCHARGE. IT DOES NOT APPEAR WHETHER A PROOF OF CLAIM WAS EVER FILED BUT IT HAS BEEN HELD THAT WHERE A PROVABLE CLAIM AGAINST A BANKRUPT IS DULY SCHEDULED, IT IS INCLUDED IN THE DISCHARGE REGARDLESS OF WHETHER THE CREDITOR PROVES IT OR DOES NOT PROVE IT. IN RE WOOD, 283 F. 565; IN RE KUFFLER, 153 F. 667. SEE, ALSO, 8 C.J.S. 564, P. 1507. IT WOULD APPEAR, THEREFORE, THAT THE DISCHARGE CONSTITUTES A LEGAL DEFENSE TO ANY ACTION ON THE NOTE BY THE COMMERCIAL INVESTMENT TRUST, INCORPORATED, AND MAY NOW OR HEREAFTER SUCCESSFULLY BE PLEADED AGAINST AN ACTION THEREON BY THE UNITED STATES, BECAUSE IT IS WELL SETTLED THAT AN ASSIGNEE OF A CHOSE IN ACTION TAKES THE SAME SUBJECT TO ALL DEFENSES AGAINST IT IN THE HANDS OF THE ASSIGNOR AT THE TIME OF THE ASSIGNMENT. THE NORTH CHICAGO ROLLING MILL COMPANY V. THE ST. LOUIS ORE AND STEEL COMPANY, 152 U.S. 596; WILLIAMS V. NEELEY, 134 F.1; ANDERSEN V. THOMPSON, 52 F./2D) 642; PAGE ON THE LAW OF CONTRACTS, SECTION 2269.

HOWEVER, A DISCHARGE IN BANKRUPTCY DOES NOT EXTINGUISH THE DEBT. FEDERAL NATIONAL BANK V. KOPPEL, ET AL., 253 MASS. 157, 148 N.E. 379; ROBINSON V. EXCHANGE NATIONAL BANK OF TULSA, OKLA., 28 F. SUPP. 244, 249. IT DOES AFFORD THE BANKRUPT A COMPLETE LEGAL DEFENSE TO AN ACTION BROUGHT TO RECOVER SUCH DEBT, BUT IN ORDER TO AVAIL HIMSELF OF IT AS A DEFENSE IT IS NECESSARY FOR HIM TO PLEAD THE DISCHARGE IN ANY SUCH ACTION. IN RE WEISBERG, 253 F. 833. THE MORAL OBLIGATION TO PAY THE DEBT REMAINS, AND SINCE THE DISCHARGE IS PERSONAL TO THE BANKRUPT, IT MAY BE WAIVED BY HIM WHENEVER HE SEES FIT. 8 C.J.S. 559, P. 1491. IT IS DIFFICULT TO COMPREHEND A SITUATION IN WHICH THE MORAL OBLIGATION TO PAY A DEBT COULD BE GREATER THAN WHERE AN EMPLOYEE FILES A VOLUNTARY PETITION IN BANKRUPTCY AND INCLUDES IN THE SCHEDULE OF LIABILITIES AN OBLIGATION WHICH HE KNOWS HIS EMPLOYER EVENTUALLY WILL BE CALLED UPON TO PAY AND THEN, SUBSEQUENT TO BANKRUPTCY PROCEEDINGS DISCLOSING NO ASSETS FOR DISTRIBUTION TO CREDITORS, HE IS CONTINUED IN HIS EMPLOYMENT BY THAT SAME EMPLOYER. THAT PRECISELY IS THE SITUATION HERE. IT WOULD SEEM THAT OCCASIONS SHOULD BE RARE IN WHICH EMPLOYEES OF THE UNITED STATES GOVERNMENT WILL NOT FEEL IT A BOUNDEN DUTY ASIDE FROM ANY LEGAL OBLIGATION TO MAKE WHOLE A LOSS WHICH THEY HAVE DIRECTLY CAUSED THE GOVERNMENT TO SUFFER--- ESPECIALLY WHERE THE EMPLOYEE CONTINUES TO DEPEND FOR HIS LIVELIHOOD UPON GOVERNMENT EMPLOYMENT; AND, IN SUCH RARE INSTANCES, IT WOULD APPEAR ADVISABLE IN THE INTEREST OF EFFICIENT AND SOUND ADMINISTRATION OF GOVERNMENT AFFAIRS THAT OFFICIALS OF THE DEPARTMENT IN WHICH THE PERSON IS CURRENTLY EMPLOYED BE INFORMED OF THE SITUATION SO AS TO ENABLE THEM TO DECIDE WHETHER IT WOULD BE IN THE INTEREST OF THE UNITED STATES TO PERMIT THAT TYPE OF EMPLOYEE TO CONTINUE IN THE SERVICE.

ACCORDINGLY, WHILE, ON THE PRESENT RECORD, THERE WOULD APPEAR NO AUTHORITY TO TAKE ANY ACTION IN RESPECT OF MR. KESSLER'S RETIREMENT FUND WITH A VIEW TO SETTING OFF THE AMOUNT OF THE GOVERNMENT'S LOSS IN THIS TRANSACTION AGAINST MONEYS TO BE PAID FROM SUCH FUND AT SOME FUTURE DATE, IT IS SUGGESTED THAT STEPS BE TAKEN TO SECURE THE WRITTEN CONSENT OF MR. KESSLER TO SUCH A SET-OFF HEREBY WAIVING THE DEFENSE OF THE DISCHARGE IN BANKRUPTCY SO FAR AS IT APPLIES TO THIS OBLIGATION. IN THE EVENT OF A REFUSAL ON THE PART OF THE EMPLOYEE TO GIVE SUCH ASSENT, OR OTHERWISE RECOMPENSE THE GOVERNMENT FOR ITS LOSS, THE MATTER SHOULD BE BROUGHT TO THE ATTENTION OF THE POST OFFICE DEPARTMENT--- WHERE KESSLER IS EMPLOYED-- - FOR SUCH ADMINISTRATIVE ACTION AS MAY BE DEEMED PROPER UNDER THE CIRCUMSTANCES.