What is an Offset in Bankruptcy?

An offset, like the term “setoff”, is the deduction by the Debtor from a claim or demand of a debt or obligation owed to the Creditor.

It can also be a counterclaim or a contrary claim or demand by which the Creditor’s claim may be lessened or canceled.

So on form B106 Schedules E/F that lists all of the Creditors, if a creditor’s claim is subject to an offset because of a deduction that the debtor may have against that claim, the yes box would be marked indicating that the claim is subject to offset.

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