This article summarises the key points arising in the application of insolvency set-off for unsecured and secured lenders when faced with mutual debts and credits with an insolvent debtor.
nInsolvency set-off is a type of set-off that arises under legislation. The rules which apply to insolvency set-off are found in r 14.25 (liquidation) and r 14.24 (administration) of the Insolvency (England and Wales) Rules 2016 SI 2016/1024 and s 323 of the Insolvency Act 1986 (bankruptcy).
Insolvency set-off applies where there are mutual debts or credits between two entities and one of the entities (the insolvent debtor) is the subject of insolvency proceedings. Insolvency set-off is automatic. It is mandatory regardless of any set-off provisions agreed between the parties and regardless of any agreement which attempts to alter the...