Mealey v. Department of the Treasury Internal Revenue Service (In Re Mealey)

OPINION

WILLIAM A. KING, Jr., Bankruptcy Judge.

This case reaches the Court on a complaint by Ronald and Elizabeth Mealey, the debtors, to recover funds held by the Internal Revenue Service. The issue before the Court is whether the retention by the I.R.S. of a tax refund which is due the debtors is a setoff in violation of the automatic stay imposed by the Bankruptcy Code. If such retention is an impermissible setoff, there is an issue as to whether an award for damages or the imposition of contempt sanctions against the I.R.S. would be appropriate. Under the facts of this case, the Court…