Langston
Langston v. Internal Revenue Serv. (In re Langston)
Opinion
Lead Opinion
Lastreto, J.
INTRODUCTION
Even the Internal Revenue Service ("IRS" or "Defendant") must obey the bankruptcy code's automatic stay. If the IRS willfully violates the stay, it is liable for an individual debtor's actual damages including costs and attorney's fees. The IRS, here, admittedly violated the automatic stay by offsetting taxes owed pre-petition with the debtors' annuity payments to be received post-petition. Before filing an administrative claim for relief with the IRS, the debtors filed an adversary proceeding. After a trial on the severed issue of actual damages, this court ruled the debtors could not prove the actual damage claim.
The debtors' attorney's fees are a different story. Two provisions of the Internal Revenue Code ( 26 U.S.C. §§ 7430 ; 7433) and related regulations ( 26 C.F.R. 301.7430-1(a) and (e) ; 301.7433-2) require the debtors to exhaust administrative remedies before filing an adversary proceeding to recover their attorney's fees for the automatic stay violation. The necessary administrative claim must first be filed with the "Chief, Local Insolvency Unit, for the judicial district in which the bankruptcy petition" was filed. 26 C.F.R. 301.7433-2(e).
*820 But…