Despite the importance of the automatic stay, in healthcare bankruptcies it is not always applied consistently, especially when the government is the creditor. Government agencies decide whether they will require the bankrupt healthcare provider to repay any Medicare overpayments previously paid. As such, government agencies may jump other creditors based on the equitable doctrine of recoupment. Recoupment is a doctrine recognized by bankruptcy courts allowing for creditors to offset their debts against payments. This is similar to setoff, an action that is not permitted under the Code. The author argues that government agencies should not be allowed to continue recoupment actions against healthcare entities that will jeopardize their reorganization processes. The author suggests that courts can fix this issue by narrowly applying the doctrine of recoupment and reducing the circumstances in which government agencies can collect from bankrupt healthcare entities without seeking relief from the automatic stay.
Government Recovery of Medicare Overpayments and the Automatic Stay,
Emory Bankr. Dev. J.
Available at: https://scholarlycommons.law.emory.edu/ebdj/vol34/iss1/7