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The Big Picture United States Agencies & Title 11 - CMBA News and Information

CMBA Updates & Legal News


Posted by: Suzana Koch on Sep 1, 2019
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his is your comprehensive and authoritative guide to dealing with federal agencies in bankruptcy cases.1 Having reviewed the intervening footnote, you know that I couldn’t possibly put together a comprehensive guide. I will do my best to review some of the more common issues the United States Attorney’s Office sees in bankruptcy cases.

Regardless of the federal agency, serving the United States of America can be a sticky wicket. Read the rules, and always check the Bankruptcy Court website. Pursuant to Bankruptcy Rule 5003(e), the Bankruptcy Clerk can post a statement designating the mailing addresses for governmental units. We update that list, and we try to keep that list organized by agency.

Think Rule of Three when serving the United States — you need to serve the Attorney General,2 the United States Attorney’s Office (that’s where you’ll find me),³ and the agency. Many of the common agency addresses are on the Court’s website. There are also additional service addresses for tax (serving the Tax Division of the Department of Justice) and the Department of Education (depending on what kind of loan). If you have reviewed your client’s federal documents, the rules, and the website, and you’re still stuck for service, you can always call our office. We do our best to help get your questions answered.

The Bankruptcy Code has some agency-specific statutes and rules. The tax statutes are the easiest example here. The Internal Revenue Service is easily the bulk of the federal bankruptcy practice. We respond to objections to claims and file objections to plan confirmation in Chapter 13 cases. If you need tax transcripts to help understand what money was applied where, we are not stingy about sharing that information. The IRS is also good about explaining how they calculate tolling periods – some of the more complicated tax issues I’ve seen are about tolling. If you have a motion to determine tax liability, my DOJ colleagues in the Tax Division will handle that, so don’t be surprised when you have a DC attorney responding to you. Tax lien priorities are usually pretty straightforward, and the IRS is generally agreeable on lien priority issues. The IRS has requested that our office file motions to dismiss; those are fairly rare, and we do not file those lightly

The Department of Education also has specific nondischargeability rules. Student loan litigation is not prolific, but we do handle those adversary proceedings. Typically, you can expect to receive our answer, initial disclosures, and discovery before the initial pretrial conference. We also try to work with debtors’ counsel to see if an income based repayment plan will benefit the debtor. Most of our student loan adversary proceedings are resolved short of trial.

While we defend the Department of Education in adversaries, we prosecute on behalf of the Social Security Administration. The SSA will ask our office to file a complaint objecting to discharge in the case of fraud. No special rules here, but the SSA complaints are generally pled with particularity and no real discovery is needed. The SSA will negotiate with debtors or debtors’ counsel to come to an agreement on overpayment cases. These cases are also usually resolved short of trial.

In the case of a criminal restitution matter, the United States has a statutory lien that arises upon pronouncement of a criminal judgment. For federal criminal fines and restitution, the United States will file a notice of lien, but generally you won’t see a proof of claim. Part of the reason for that is jurisdictional — the Title 18 statutes take precedence over the Bankruptcy Code. The automatic stay does not apply to the enforcement of criminal judgments and collection activities. Restitution is not dischargeable. We can negotiate payments during a bankruptcy if it makes sense for the debtor, but the debtor’s payment history will be a relevant factor in any negotiation. Good faith payments are always helpful.

The Small Business Administration (SBA) and the Department of Housing and Urban Development (HUD) will file liens to protect loans they may have made. Our office will protect their interests in any lien litigation, but those are not usually hotly contested. Generally, lien-filing dates will determine the validity, extent, and priority issues. Title work always helps in these kinds of cases. The Department of Agriculture (USDA) can also fall into this bucket.

Chapter 11 cases are their own category. If a federal agency has an interest in cash collateral, you’ll want to negotiate a cash collateral order. Depending on the agency, you may need agency approval for a 363 sale. Our office may be involved, or you may see someone from DC or directly from the federal agency.

The best help our office can provide is sometimes just to get you connected to the right person at the right place. And we are happy to do that — feel free to call us at (216) 622-3600.

1
No, it’s not. At best, this is something of a roadmap. And I’m writing in my individual capacity because this is not an official statement of the United States of America, the Department of Justice, or any federal agency. The information contained herein is provided solely for informational purposes and is intended to be used strictly as a basis for discussion and education. It is not intended to be a complete overview of the subject matter, it is not legal advice, and it is does not represent any sort of attorney-client relationship. Should you be in need of legal advice, consult a paid professional. I have now complied with my standards of conduct. Back up to the article we go.

2
Attorney General of the United States, Main Justice Building, 10th & Constitution Avenue, N.W., Washington, D.C. 20530.

3
Office of the United States Attorney, Attn: Bankruptcy Section, Carl B. Stokes United States Court House, 801 West Superior Avenue, Suite 400, Cleveland, Ohio 44113-1852. (the “Attn: Bankruptcy Section” is the important bit here).


Suzana K. Koch is an Assistant United States Attorney in the Office of the United States Attorney for the Northern District of Ohio.  She practices in the Financial Litigation Unit where she is responsible for the civil enforcement of criminal monetary penalties, managing a docket of over 2000 cases with a total liability of more than $900,000,000.  AUSA Koch represents and defends the United States of America in chapter 7, 11, 12, and 13 bankruptcy cases and adversary proceedings.  She also protects the interests of the United States in over 400 28 U.S.C. § 2410 foreclosure cases in county Courts of Common Pleas throughout the Northern District of Ohio.

Prior to joining the Office of the United States Attorney, AUSA Koch was a partner in a regional law firm with a diverse commercial litigation and transactional practice focused on commercial reorganization and corporate restructuring.  She frequently lectures and publishes on bankruptcy and insolvency topics.  She also deeply enjoys the treasures of Northeast Ohio — hiking in the Cuyahoga Valley National Park, rowing on the Cuyahoga River, admiring the beauty on display at the Cleveland Museum of Art, golfing at Sleepy Hollow, and, best of all, sunsets over Lake Erie in late July. She has been a CMBA member since 2003. She can be reached at (216) 622-3600 or suzana.koch@usdoj.gov.

 

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