As previously discussed here, Ambac Financial Group Inc. has filed for bankruptcy for Chapter 11 bankruptcy relief with United States Bankruptcy Court for the Southern District of New York. Immediately following its bankruptcy filing, Ambac sued the United States to block the Internal Revenue Service from placing a lien on its assets in an attempt to recover an estimated $700 million in tax refunds that the agency believes it may be owed. Ambac’s suit claims that the tax refunds are essential to its reorganization efforts.
As a result, Ambac and the IRS have come to a stipulated agreement, which was approved by the bankruptcy court, whereby the IRS has agreed to not take enforcement action against Ambac without giving fives days’ notice. The agreement will stay in place until the bankruptcy court decides on the issue. Under the agreement, the IRS has until December 31, 2010 to submit its reply to Ambac’s motion, to which Ambac has until January 18, 2011 to reply.