The Right To Set-Off During Insolvency Proceedings

Author:Dr. Marco Wilhelm, Dr. Malte Richter, LLM and Tina Hoffmann
Profession:Mayer Brown

The rules on set-off under certain circumstances allow to settle" a claim with a counterclaim and, thus, to avoid making back and forth payments. In contentious situations, the set-off enables the party pleading the set-off to enforce its own claim in an easy way. This easy form of satisfaction is even available to the creditor in situations where the debtor's assets have deteriorated. However, in insolvency proceedings, special rules apply with regard to set-off which might either make a set-off impossible in a given case or entail the risk of the set-off being subject to avoidance rights by the insolvency administrator. This article provides an overview of the possibility to declare set-off and its limits in the financial crisis of the party against which set-off is declared.

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Originally published 21 March 2018

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