In re: DARRIN LENALD COOPER

Summarized by Bradley Pearce , Pearce Law PLLC
2 years 1 month ago

Case Type:

Consumer

Case Status:

Affirmed

Citation:

BAP No. WW-23-1098-CBS (9th Circuit, Jan 16,2024) Not Published

Tag(s):

Ruling:

A creditor, including a federal agency (here, the Social Security Administration), may recoup amounts overpaid to a debtor after the debtor has received a bankruptcy discharge if the agency's claim arises from the same transaction as the debtor's claim. In this case, the SSA could withhold funds owed to the debtor for the debtor's workplace injury because the SSA had overpaid the debtor benefits payable due to the debtor's workplace injury. Because the overpayment and benefits arise from the same workplace injury, the SSA was entitled to exercise its right of recoupment.

Procedural context:

In ruling on the debtor's motion alleging that the Social Security Administration (SSA) had violated the discharge injunction, the bankruptcy court ruled that the SSA could recoup amounts overpaid to the debtor from future payments that he might be entitled to. The debtor timely appealed.

Facts:

Before filing his chapter 7 bankruptcy petition, Darren L. Cooper worked for Boeing Corporation. In 2007, he was injured and began receiving compensation through the Washington State Department of Labor & Industries (i.e., "workers' compensation"). In 2017, Cooper applied to the Social Security Administration for Social Security Disability Insurance (SSDI) benefits and Supplemental Security Income (SSI). The application summary claimed that Cooper had been unable to work since February 9, 2009, and that he had applied or intended to file for workers' compensation but was not receiving benefits. Cooper's application initially was denied, With the assistance of counsel, he appealed. The administrative law judge issued Cooper a favorable decision on April 30, 2019. The decision found that Cooper had been disabled since December 1, 2014. The administrative law judge warned Cooper that the "workers' compensation offset provisions at 20 C.R.R. 404.408 may be applicable." On May 1, 2019, Cooper sent the Social Security Administration -- at its Everett, Washington, office -- a completed questionnaire that the SSA used to calculate Cooper's benefits. Cooper disclosed that he was receiving workers' compensation from the state of Washington. The information from the questionnaire was supposed to be transmitted to the SSA's Western Program Service Center in Richmond, California ("Western PSC"). The Everett office failed to correctly process Cooper's application and the Western PSC calculated Cooper's benefits as if he had not received state workers' compensation. The SSA sent Cooker a notice of his calculated benefits. The notice stated that Cooper's SSDI payment could be reduced if he received workers' compensation and asked Cooper to inform the SSA upon learning of Washington's decision on his workers' compensation claim. After determining that Cooper had not previously received SSI benefits, it sent Cooper a check for $77,355.50 and began paying monthly SSDI payments. Cooper filed a chapter 7 petition on July 21, 2020. He did not list the SSA as a creditor, and the SSA did not receive notice of Cooper's bankruptcy. The case was closed, and Cooper received a discharge in October 2020. Cooper then responded to a request from the SSA regarding whether he had received workers' compensation payments. Again, Cooper complied with the request and informed the SSA of his bankruptcy discharge. The SSA notified Cooper that it had overpaid Cooper $73,112.90, incorrectly claiming that Cooper had not provided the SSA with evidence of his workers' compensation payments. Cooper did not appeal the overpayment ruling. Cooper's attorney moved to reopen Cooper's chapter 7 case and filed a motion to have the SSA held in contempt for violating the automatic stay (not the discharge injunction). In response, the SSA argued that its actions were not subject to the discharge injunction due to the equitable doctrine of recoupment.

Judge(s):

CORBIT, BRAND, and SPRAKER, Bankruptcy Judges

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