Exemption Claim Overrides the Government’s Right of Setoff, District Judge Says

On an issue where the courts are hopelessly divided, a district court in Richmond, Va., ruled in favor of the debtor by barring the Internal Revenue Service from setting off a tax refund when the debtors were claiming an exemption in the refund. In her September 10 opinion, District Judge M. Hannah Lauck also rejected the government’s claim of sovereign immunity. Twice this week, we have featured Judge Lauck in this column. On September 10, we described how the Fourth Circuit adopted her opinion regarding appellate standing and equitable mootness. Mar-Bow Value Partners LLC v. McKinsey Recovery & Transformation Services US LLC (In re Alpha Natural Resources Inc.), 17-2268, 2018 BL 321354 (4th Cir. Sept. 6, 2018).

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