§ 553

In re Cabrera

This cause came before the court upon the Motion for Order Allowing Set- Off Against Pledged Funds on Deposit filed on behalf of a secured creditor (credit union, or CU) and debtor's Motion for Credit Union to Release Funds.
Ruling: 
Credit union allowed to retain funds as set-off against prepetition debt.
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Consumer case opionion summary, case decided on December 08,2009, LexisNexis #0110-090

In re Lehman Bros. Holdings

A bankruptcy debtor owed a loan debt to a foreign bank and the bank sought to set off funds in the debtor's account against such debt under 11 U.S.C.S. § 553(a). The debtor asserted that the funds were not transferred to the debtor's account by an affiliate of the debtor until after the debtor's bankruptcy petition was filed, and thus the funds were not available for setoff.
Ruling: 
Funds transferred by creditor bank to debtor's account after petition was filed were not subject to setoff.
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Commercial case opionion summary, case decided on May 12,2009, LexisNexis #0609-124

In re Badour

A bank at which debtor maintained accounts, sought to offset, against funds in two general deposit accounts belonging to debtor and pursuant to 11 U.S.C.S. § 553, debtor's pre- petition liability in the amount of $12,760 owed to bank on account of credit obligations that had been secured by those deposit accounts. Also at issue was whether debtor's W. Va. Code § 38-10-4 exemption claim therein was cognizable per 11 U.S.C.S. § 522.
Ruling: 
Creditor could offset prepetition liability against debtor's bank accounts that secured the debt.
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Consumer case opionion summary, case decided on March 13,2009, LexisNexis #0409-055

Ivey v. Hunter Acquisitions Inc. (In re Carolina Acoustical & Floorings Inc.)

Chapter 7 trustee filed an adversary complaint against the obligor on promissory notes for $30,000 and $50,000, arising out of defendant's purchase of the assets of debtor. At issue inter alia was the impact on the rights of the various parties of setoff provisions in 11 U.S.C.S. § 553 and former Article 6 of North Carolina's version of the Uniform Commercial Code (NCUCC), N.C. Gen. Stat. § 25-6-101 et. seq. (repealed 2005).
Ruling: 
Obligor on promissory note in favor of debtor allowed setoff for debtor's breach of contract.
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Commercial case opionion summary, case decided on March 03,2009, LexisNexis #0509-066

In re Bill Heard Enters.

A creditor which provided financing for debtors' automobile dealership franchises was granted a security interest in the debtors' assets, and the debtors' franchisor maintained open accounts through which the debtors paid for vehicles, parts, and other items and the franchisor paid amounts due to the debtors. The creditor moved to compel the franchisor to turn over funds in the open accounts, and for summary judgment.
Ruling: 
Franchisor was entitled to recoupment and setoff from debtor franchisee's amounts.
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Commercial case opionion summary, case decided on February 12,2009, LexisNexis #0409-123

In re Semcrude LP

A creditor had separate contracts with bankruptcy debtors, subsidiaries with a common corporate parent, and the contracts provided that any amount due to a subsidiary could be offset against amounts owed by other subsidiaries. The creditor owed an amount to one subsidiary but was owed amounts by the other two subsidiaries, and the creditor moved for relief from the automatic bankruptcy stay to effect a triangular setoff.
Ruling: 
Triangular setoff among creditor, debtor and debtor's subsidiaries prohibited due to lack of mutuality.
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Commercial case opionion summary, case decided on January 09,2009, LexisNexis #0209-049

Comer v. United States SSA (In re Comer)

Plaintiff chapter 7 debtors filed a complaint against the United States Social Security Administration (SSA), seeking to recover, pursuant to 11 U.S.C.S. § 547 and § 553(b), a setoff by the SSA of the debtors' federal tax refund against indebtedness owed to the SSA for overpayment of Social Security benefits.
Ruling: 
Debtor could not recover valid setoff against tax refund by Social Security Administration.
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Consumer case opionion summary, case decided on April 18,2008, LexisNexis #0508-082

Kaye v. Carlisle Tire & Wheel Co.

Appellant Trustee of the chapter 11 liquidating trust challenged a decision of the United States Bankruptcy Court for the Middle District of Tennessee, Nashville Division, that dismissed the Trustee's claims against appellee creditor. The creditor filed a cross-appeal.
Ruling: 
Bankruptcy court properly upheld debtor's settlement agreement with creditor executed more than 90 days prepetition.
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Commercial case opionion summary, case decided on March 27,2008, LexisNexis #0408-100

Harrison v. United States Dept of Agriculture Rural Dev. (In re Harrison)

Plaintiff debtors filed for relief under chapter 7 of the United States Bankruptcy Code and received a discharge in bankruptcy. The debtors filed an action against defendant, the United States Department of Agriculture Rural Development (RD), claiming that a pre-petition setoff payment to their loan from RD was a preferential transfer that was subject to turnover under 11 U.S.C.S. §§ 522 and 547. The parties sought summary judgment.
Ruling: 
Prepetition setoff payment to U.S. Department of Agriculture Rural Development was not preferential.
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Consumer case opionion summary, case decided on March 13,2008, LexisNexis #0408-010

CDI Trust v. U.S. Elec. Inc. (In re Communication Dynamics Inc.)

Plaintiff liquidating trust filed a complaint against defendant seeking, inter alia: (1) an accounting and turnover of the amounts due under certain notes; (2) to compel defendant to pay the full value of the notes; (3) recovery of damages for defendant's breach of the notes; and (4) a declaratory judgment that defendant had no right of setoff against the notes. The trust moved for summary judgment.
Ruling: 
Rejection damages claim was a prepetition claim subject to setoff against prepetition debt owed to debtor.
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Commercial case opionion summary, case decided on February 21,2008, LexisNexis #0308-101

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