Listen to this article

HED: Bankruptcy court orders state agency to give back woman’s tax refund
A federal bankruptcy court has ruled that the Wisconsin Department of Children and Families must give back more than $3,000 to a Madison woman.
The woman, Maryam Muhammad, and Terry Briggs filed for Chapter 7 bankruptcy in May 2017 in the Western District of Wisconsin. A court discharged their debts in November. Nevertheless, the DCF in March took part of Muhammad’s tax refund.
Muhammad had participated in Wisconsin’s food stamp program on behalf of her grandson from 2012 to 2014. DCF sent her notices in 2014 saying she had provided inaccurate information that resulted in the agency paying her $5,520 more in food stamps than she should have gotten and that she had to pay DCF back. She did not appeal the determination, and in March, the DCF took part of her tax refund.
Shortly after, Muhammad filed a contempt motion against DCF, contending the money she owed to DCF had been discharged by the bankruptcy and asking the court to order DCF to give back the rest of her tax refund. She also asked for attorneys’ fees and punitive damages.
DCF, on the other hand, contended that because the more than $5,520 was a “domestic support obligation,” it could not be discharged in bankruptcy.
U.S. Bankruptcy Court Judge Cathrine Furay on June 1 handed down a memorandum decision finding that the $5,520 had been discharged in the bankruptcy and ordering DCF to pay Muhammad the more than $3,000 it had taken from her tax refund.
Furay noted that there is a split in authority among courts in deciding whether overpayments from a government agency count as “domestic support” that is not dischargeable in bankruptcy.
In the end, Furay reasoned that because Muhammad had applied for the benefits on behalf of her grandson and not her child, the $5,520 owed to DCF was dischargeable.
However, Furay did not order DCF to pay for Muhammad’s attorney’s fees because Muhammad was representing herself. Furay also did not award Muhammad punitive damages because federal bankruptcy statutes give government agencies immunity from those sorts of damages.