Ardell L Waterfield

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UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILSON DIVISION
IN RE:
ARDELL L. WATERFIELD, Case No: 05-02352-8-JRL
Chapter 13
Debtor.
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ORDER
This matter is before the court on the order directing Unicare / Ford Employee Health Benefit
(“Unicare”) to appear and show cause why it should not be held in contempt for improperly deducting
monies from the debtor’s disability payments. On October 26, 2005, the court conducted a hearing on this
matter.
On August 23, 2005, the debtor moved the court for an order directing Unicare to show cause why
it has been deducting monies fromthe debtor’s disabilitypayments. Unicare filed no response to the motion.
On September 28, 2005, the court entered the subject order to show cause. Unicare failed to appear at
the hearing. The debtor was unable to clarify whether Unicare is recouping disability overpayments,
withholding disability payments to pay a pre-petition claim of the Internal Revenue Service (IRS), or both.
The trustee confirmed that the IRS had filed a claim in the case.
Unlike the right of setoff, recoupment is not subject to the automatic stay. First Nat. Bank of
Louisville v. Master Auto, 693 F.2d 308 (4th Cir. 1982); In re Bram, 179 B.R. 824 (Bankr. E.D. Tex.
1995)(Employee benefit plan administrator’s right to recover excess disability benefits was right of
Case 05-02352-8-JRL Doc 30 Filed 10/27/05 Entered 10/27/05 15:21:43 Page 1 of 2

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recoupment, which the plan administrator could exercise without seeking relief from the automatic stay).
Thus, to the extent Unicare is withholding monies from the debtor’s payments to pay a pre-petition tax
claim, it is enjoined from continuing that course of conduct. The IRS claim must be administered in the
bankruptcy case. To the extent Unicare is recouping overpaid benefits, it is not effected by the automatic
stay. The debtor would need to challenge the recoupment by way of adversary proceeding.
So Ordered.
Dated: October 27, 2005
Case 05-02352-8-JRL Doc 30 Filed 10/27/05 Entered 10/27/05 15:21:43 Page 2 of 2