This paper discusses the application of recoupment in Chapter 11 bankruptcy.
An area of substantial importance within bankruptcy jurisprudence is the distinction between the common law doctrine of recoupment and the Bankruptcy Code’s statutory doctrine of setoff. The Bankruptcy Code does not explicitly address recoupment, but setoff is addressed in section 553. The terms recoupment and setoff are often used interchangeably, however distinction is important because these doctrines are in fact two divergent concepts of law. Recoupment, unlike setoff, is not subject to the Bankruptcy Code’s automatic stay provisions, and recoupment is also not subject to preference actions. The paper further discusses common areas in which recoupment issues often arise in Chapter 11 bankruptcy cases.
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