Setoffs In Bankruptcy

Law360, New York (December 13, 2010, 1:02 PM EST) -- Two recent bankruptcy court decisions, separated by a single day, highlight the difficult nature of setoffs in bankruptcy situations and are bookends on the risks of moving too quickly or not quickly enough.

Section 553 of the Bankruptcy Code preserves (but, as shown by the second case below, does not absolutely preserve) the right of a creditor to offset mutual debts with the debtor under common or statutory law. However, section 553 does not necessarily preserve an actual setoff, and a setoff effected within 90 days...
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