Bankruptcy Court Does Not Allow FSA to Bootstrap CCC Overpayment Refund to its Secured Claim.

The Farm Service Agency (FSA) filed an amended proof of claim in the debtor’s Chapter 12 bankruptcy action, seeking to add to its secured claim $31,732, an amount allegedly overpaid months earlier by the Commodity Credit Corporation (CCC) to the debtor under the Supplemental Revenue Assistance Payments (SURE) Program. The debtor objected to the amended claim, arguing that the FSA could not voluntarily refund prepetition overpayments to the SURE Program, without Court approval, and then seek a larger secured claim for itself based on the refund. The court agreed, sustaining the objection. The CCC, not the FSA, was the party with standing the file the claim. Neither the FSA nor the CCC timely fulfilled any of the requirements to assert a right to setoff as set forth in In re Britton, 83 B.R. 914 (Bankr. E.D.N.C. 1988). The court allowed CCC 30 days to file an unsecured claim in the amount of $31,732. In re Barefoot, 12-02160-8-DMW, 2014 Bankr. LEXIS 1062 (E.D. N.C. Mar. 18, 2014).

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