Recoupment in Bankruptcy

Recoupment in Bankruptcy

Definition

A recovery of a debt owed by the debtor to the creditor that arose out of the same transaction as a debt owed by the creditor to the debtor. In a bankruptcy case, recoupment allows a creditor to deduct a pre-bankruptcy-petition debt from amounts owed by the creditor to the debtor for post-petition services if the pre-petition debt and the post-petition services are part of a single transaction. Recoupments are exempt from a bankruptcy proceeding's automatic stay. Recoupment may also be referred to as equitable recoupment.

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