Law Commons^™

Availability Of Setoff To Foreign Debtors And Representatives In U.S. Courts, Joseph Muschitiello

Bankruptcy Research Library

(Excerpt)

Setoff is the principle of allowing a party to reduce the debt it owes to an entity by applying a credit for any claim it has against the same entity. The purpose of setoff rights is rooted in “avoiding the absurdity of making A pay B when B owes A.” It is meant to be used by debtors as affirmative defenses or counterclaims. Section 553 of title 11 of the United States Code (the “Bankruptcy Code”) generally preserves the right of setoff in bankruptcy cases.

This memorandum explores how and when foreign debtors and representatives may exercise setoff rights …

Three Against Two: On The Difference Between Property And Contract And The Example Of Deposit Accounts In Bankruptcy, Jeanne L. Schroeder, David G. Carlson

Faculty Articles

In Citizen's Bank v. Strumpf (1995), Justice Scalia announced that deposit accounts are not "property". Five years later, the Uniform Commercial Code was amended to make deposit accounts collateral for the depositary bank maintaining the account, thereby crowding the field previously occupied by the common law right of setoff. Security interests attach to personal "property." Security interests attach to deposit accounts. Deposit accounts, by syllogistic logic, are property. Does this mean that the UCC has overruled the Supreme Court? We argue not. A deposit account is a mere contract in the two-person universe that contract law presupposes. A deposit account …

Wrongful Death Actions Under Section 1983, Martin A. Schwartz, Steven Steinglass, Richard Emery, Ilann Margalit Maazel

Martin A. Schwartz

No abstract provided.

The Irs Can Offset Post-Petition Tax Overpayments Against Pre-Petition Tax Liabilities, Kyle J. Tumsuden

Bankruptcy Research Library

(Excerpt)

In bankruptcy cases, creditors have the powerful right of “setoff,” i.e., the right to “net” or cancel payments. The right to set off usually arises in cases of mutual debt obligations where a debtor owes a debt to a creditor who in turn owes a unilateral debt back to the same debtor. The rationale for the right to setoff it obvious, as it allows the parties to apply their mutual debt obligations against each other, “thereby avoiding the absurdity of making A pay B when B owes A.” In other words, the court will reduce the two competing judgments …

The Differences Between The Right To Setoff Under 11 U.S.C. §553 And 11 U.S.C. §558, Maria Ehlinger

Bankruptcy Research Library

(Excerpt)

In bankruptcy cases, the right to setoff is a powerful tool used by both debtors and creditors to avoid having to pay a debt owed to another. The right to setoff is defined as “[a] debtor’s right to reduce the amount of a debt by any sum the creditor owes the debtor the counterbalancing sum owed by the creditor.” A right to setoff usually arises when a debtor owes a debt to a creditor and the creditor owes a debt to the debtor. The purpose of a setoff is to “allow entities that owe each other money to apply …

Clearinghouses As Liquidity Partitioning, Richard Squire

Faculty Scholarship

To reduce the risk of another financial crisis, the Dodd-Frank Act requires that trading in certain derivatives be backed by clearinghouses. Critics mount two main objections: a clearinghouse shifts risk instead of reducing it; and a clearinghouse could fail, requiring a bailout. This Article’s observation that clearinghouses engage in liquidity partitioning answers both. Liquidity partitioning means that when one of its member firms becomes bankrupt, a clearinghouse keeps a portion of the firm’s most liquid assets, and a matching portion of its short-term debt, out of the bankruptcy estate. The clearinghouse then applies the first toward immediate repayment of the …

In Re Awal Bank: Expanding Ability To Avoid Setoff In Chapter 15 Bankruptcy Cases, Jacob Chase

Bankruptcy Research Library

(Excerpt)

Foreign bankruptcy representatives seeking to avoid setoff of fund transfers pursuant to section 553 of the Bankruptcy Code may enjoy more flexible standards than ever before. In a recent decision by the United States Bankruptcy Court of the Southern District of New York, In re Awal Bank, Judge Gropper allowed the foreign representative for Awal Bank to avoid a setoff by HSBC even though the bank had not filed a plenary chapter 7 or 11 bankruptcy proceeding within 90 days of the setoff, holding that Awal Bank’s filing under Chapter 15 within the relevant 90 day look-back period …

United States V. White, 365 B.R. 457, Robert Griswold

Bankruptcy Research Library

(Excerpt)

In U.S. v. White, 365 B.R. 457 (Bankr. M.D. Pa. 2007), the U.S. Bankruptcy Court for the Middle District of Pennsylvania addressed the issue of whether the Internal Revenue Service (“IRS”) may setoff the entire pre-petition debt against pre-petition claims that have been declared exempt, or whether the IRS is only allowed to setoff up to the amount of the priority claim. The court held that the IRS may setoff the entire debt and is not limited to the amount of the priority claim.

The proper treatment of the IRS’ setoff right in bankruptcy is unclear because of …

Recoupment: Apples, Oranges And Fruit Basket Turnover, David G. Epstein

Law Faculty Publications

fiscal years and deducted the overpayment from its payments to H during that year. The fiscal year 2000 was also the year that H filed for Chapter 11. H filed an adversary proceeding against US contending that the deductions within four months before H's bankruptcy filing were voidable preferential transfers and that US's deductions after the bankruptcy filing were in violation of the automatic stay. The bankruptcy judge, the district court judge, and a unanimous appellate court panel looked to the law of recoupment to hold that US's reduction of payments was neither a preferential transfer nor a violation of …

Wrongful Death Actions Under Section 1983, Martin A. Schwartz, Steven Steinglass, Richard Emery, Ilann Margalit Maazel

Touro Law Review

No abstract provided.

Equitable Recoupment: Revisiting An Old And Inconsistent Remedy , Camilla E. Watson

Fordham Law Review

No abstract provided.

Setoff And Bankruptcy, Lawrence Kalevitch

Cleveland State Law Review

The code treats liens and setoffs as secured claims. A lienor under §506 receives a secured claim in the face amount of the debt secured only if the collateral has at least that value. Section 506(a) requires collateral valuation to determine the amount of the secured claim. Setoff in the face amount of a creditor's claim likewise requires valuation. Part II discusses §506(a) and §553 and how they may limit, in appropriate cases, the setoff right to less than the face amount of a creditor's claim. Part II shows that this reading of the Bankruptcy Code is not only consistent …

Dancing On The Edge Of Article 9, James J. White

Articles

Despite the fact that Article 9 is a much more comprehensive personal property security statute than was ever found in American law prior to its enactment, cases continue to present issues on the scope of the Article. Gone are the cases in which a court was called upon to determine whether a "conditional sales contract" could be dealt with under the "factor's lien" law; it is now clear that all such personal property security devices are governed by Article 9. Yet many problems remain for the unwary lawyer. I will identify several and deal in detail with three of these …

A Comparative Negligence Checklist To Avoid Future Unnecessary Litigation, John M. Rogers, Randy Donald Shaw

Law Faculty Scholarly Articles

Systems of comparative negligence, whereby the negligence of a plaintiff serves to reduce rather than to preclude tort recovery in negligence, have been adopted in thirty-nine states. The common law rule that contributory negligence is an absolute bar to recovery is still the law in Kentucky, although modified by the doctrine of "last clear chance." Kentucky may soon join the trend toward comparative negligence, however. In the last legislative session, bills to adopt comparative negligence were introduced in both the House of Representatives and the Senate. A hearing on this subject was held by the Interim Judiciary and Civil Procedure …

Pleading-Counterclaim-Shipper's Counterclaim In Carrier's Action For Freight No Violation Of Interstate Commerce Act

Michigan Law Review

See note, supra, on Chicago and N. W. Ry. v. Lindell, 281 U. S. 14, 50 Sup. Ct. 2co, 74 L. ed. (Adv, Op. 272), at page 245 of this number.