Ambac Reorg Hits Court Snag: Report

NEW YORK ( TheStreet) -- There may be more trouble on the way for Ambac Financial Group ( ABKFQ) after the U.S. Justice Department filed a lawsuit over the restructuring of the monoline insurer.

The suit, filed on behalf of the Internal Revenue Service, seeks to block a state court's restructuring plan that could stop the IRS from collecting $700 million in taxes, according to a Reuters report.

Ambac Financial Group received approval in January to restructure its insurance unit -- Ambac Assurance Corp. -- a decision that would allow monoline to write new business.

The U.S. government attempted to dissolve the injunction in January and move the Ambac Assurance case to a federal court.

--Written by Maria Woehr in New York.

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