Faasoa

MEMORANDUM DECISION AND ORDER DISMISSING COMPLAINT

Before the court is defendant Army & Air Force Exchange Service’s motion to dismiss under Rule 12(b)(6). Prepetition, plaintiff Jubilee Faasoa incurred credit card debt to Defendant. He then filed his 2016 federal income tax return, expecting a refund. But the U.S. Department of the Treasury intercepted the tax overpayment and applied it to the debt he owed Defendant. No funds remained once the setoff was complete. Plaintiff consequently did not receive a tax refund. And despite repeated demands, Defendant declined to issue one.

In response, Plaintiff brought this adversary proceeding seeking: (1) immediate turnover of the tax refund under §§ 522, 541, 542 and 647; and (2) § 362(k)(Z) damages, including punitive damages, for Defendant’s alleged ongoing stay violation. This motion followed.

The court finds that Defendant holds nonbankruptcy law setoff rights that are recognized and enforceable in bankruptcy under § 553. Plaintiff does not identify compelling circumstances to justify disallowing setoff. And his other arguments fail as a matter of law. Accordingly, the court grants Defendant’s motion and dismisses the complaint…