The Debtor filed a Complaint against the U.S. Department of Housing and Urban Development ("HUD") to turnover his 2003 federal income tax refund which HUD set off against the debtor's pre-petition debt owed to HUD for a foreclosed home pursuant to 26 U.S.C. § 6402 (Federal Intercept Statute).  The setoff occurred one day after the debtor filed his bankruptcy petition.  In addition, the debtor sought a determination that HUD violated the automatic stay of 11 U.S.C. § 362.  HUD moved for retroactive, or nunc pro tunc, relief from stay by annulment of the stay.  The Bankruptcy Code preserves the right to setoff that exists under nonbankruptcy law, and Section 6402 allows the I.R.S. to offset a tax refund against any debt which the taxpayer may owe to a federal agency.  See 26 U.S.C. § 6402(d).  Nevertheless, regardless of any established rights to conduct a setoff, postpetition acts to conduct a setoff are prohibited by the automatic stay under Section 362.  Further, prepetition creditors generally may not execute a postpetition setoff on property which the debtor has exempted.  The Court found that annulment of the automatic stay would be contrary to the intent of Congress and the Commonwealth of Virginia.  Accordingly, the Court concluded that the government's post-petition setoff of the debtor's tax refund to prepetition debt was a violation of the automatic stay, and therefore ordered that HUD turn the debtor's tax refunds over to the trustee to administer because it is property of the estate.  Nevertheless, the Court found that HUD's actions were not willful, and therefore did not issue sanctions against HUD for violating the automatic stay.