This Note will explore the interaction between recoupment and bankruptcy by focusing on the Eighth Circuit’s decision in In re Terry. Terry is significant because the Eighth Circuit allowed an insurance company to recoup pre-petition overpayments from the bankrupt debtor’s post-petition benefits. In doing so, the Eighth Circuit refused to acknowledge a separate balancing of the equities test, independent from the traditional same transaction requirement, when determining a creditor’s recoupment defense. This discussion will center on recoupment’s “same transaction” test and why it can be utilized to achieve sound bankruptcy policy by denying recoupment claims. It is this Note’s contention that Terry’s precedent, that the doctrine of recoupment does not include a separate equitable balancing test, will not be as devastating to bankrupt plaintiffs as initially thought by bankruptcy practitioners and judges. This is because the same transaction test is still a viable legal tool capable of denying recoupment.
Recoupment and Bankruptcy: How to Effectuate Bankruptcy Policy through the Same Transaction Test ,
78 Mo. L. Rev.
Available at: https://scholarship.law.missouri.edu/mlr/vol78/iss3/10