Bankruptcy set-off: Difference between revisions

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{{Insolvency set-off capsule}}
{{Insolvency set-off capsule}}


{{seealso}}
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*[[Set-off]]
*[[Set-off]]
*{{casenote|National Westminster Bank Ltd|Halesowen}}
*{{casenote|National Westminster Bank Ltd|Halesowen}}

Revision as of 11:36, 18 January 2020

It has been treated as an authoritative statement of English law since 1972[1] that you cannot contract out of bankruptcy set-off. The bankruptcy set-off rules (currently made (British) flesh by the Section 323 of the Insolvency Act 1986) operate automatically and are mandatory upon the commencement of winding-up.

The administrator must take account of all dealings between the creditor and the bankrupt (including future and contingent obligations and unliquidated sums owing). Sums due from one must be set off against the sums due from the other, except that sums due from the bankrupt cannot be included if, when the bankrupt debtor incurred them, the creditor knew of the existence of any of the following formal bankruptcy steps against that debtor:

  • A resolution or petition to wind-up (if a company).
  • An application for an administration order or of notice of intention to appoint an administrator (if a company).
  • A pending bankruptcy petition (if a natural person).

Therefore a bank cannot agree not to exercise the right to combine accounts.[2]

See also

References

  1. See National Westminster Bank Ltd v Halesowen and in 1995, Stein v Blake
  2. Interestingly, this is not the case under the Swiss Bankruptcy Code.