Barry Douglas

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
BARRY DOUGLAS,
Debtor.
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Case No. 09-00491
(Chapter 11)
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION REGARDING MOTION TO
VACATE ORDER FOR OFFSET AND RELEASE OF FUNDS
TO DEBTOR UNDER RIGHTS GRANTED BY AVOIDING POWERS
The debtor has filed a motion requesting the court to vacate
its prior order authorizing Western Union Federal Credit Union
("Western Union") to exercise its right of setoff. 	Previously
the debtor was a debtor in Chapter 7. 	He is now a debtor in
possession in Chapter 11. 	He correctly observes that as a debtor
in possession he has the powers of a trustee under 11 U.S.C.
§ 553(b). 	That is the primary reason he advances for why it is
now appropriate to vacate the court's prior order that lifted the
automatic stay to permit Western Union to exercise postpetition
its right of setoff.
But § 553(b) concerns the trustee's power to recover an
amount that was set off pursuant to a right of setoff that was
The document below is hereby signed.
Signed: December 01, 2009.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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exercised prior to the filing of the petition. 	A request to
recover property requires an adversary proceeding complaint.
Fed. R. Bankr. P. 7001. 	In any event, the motion does not allege
sufficient facts to demonstrate that § 553(b) would be
applicable. 	Even if Western Union exercised a right of setoff on
the day prior to the filing of the petition, which is what the
debtor now contends, that alone would be insufficient to
establish a right of recovery under § 553(b). 	And if Western
Union had already exercised its right of setoff prepetition, then
the order lifting the automatic stay to authorize an exercise of
that right of setoff postpetition would have been ineffective to
have any consequence: once a right of setoff has been exercised
prepetition, that right of setoff no longer exists to be
exercised postpetition.
The court's prior order lifted the automatic stay to permit
Western Union to exercise any right of setoff that existed on the
petition date, and the motion to vacate similarly sets forth
insufficient facts demonstrating why the order granting such
relief was in error and ought to be vacated. 	As in the case of
failing to allege sufficient facts to demonstrate the
applicability of § 553(b) if setoff was exercised prepetition,
the debtor has not alleged sufficient facts to demonstrate that
any right of setoff that was not exercised prepetition was not
preserved by § 553(a).
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3	O:\TEEL\Garrett\Decisions\Western Federal Vacate Lift Stay Setoff (Douglas).wpd
Moreover, if the right of setoff was unavailable to Western
Union under § 553(a), the debtor could have raised that as a
defense to the motion for relief from the automatic stay even
when he was only a debtor in Chapter 7 and not a debtor in
possession in Chapter 11. 	He has not addressed Rule 60 of the
Federal Rules of Civil Procedure, and the standards he would have
to meet under that rule in order to be entitled belatedly to
raise that defense.
The debtor also appears to contend that only some of his
loan agreements with Western Union included Western Union's being
given a security interest (to secure the debt arising from the
loan) in the debtor's accounts. 	But Western Union would have had
a right of setoff as to all debts owed it without the necessity
of a loan agreement having specified that Western Union was given
a security interest in the debtor's accounts to secure payment of
those debts.
An order follows denying the debtor's motion.
[Signed and dated above.]
Copies to: Debtor; Jeffrey A. Vogleman, attorney for Western
Federal Credit Union; Office of United States Trustee.
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