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Bankruptcy: set-off
 

 

A creditor can set off a debt owed to him by the bankrupt against a debt owed by him to the bankrupt. This right only arises with reference to mutual credits, mutual debts and other mutual dealings between the bankrupt and the creditor, and where the creditor had no notice of an available act of bankruptcy when he gave credit. The creditor cannot set off a debt owed to him in one capacity against a debt owed by him in another.

Reference: The Penguin Business Dictionary, 3rd edt.