Purchasing claims from bankruptcy estate .

Edwards Finance > Loans

Q. Could anyone direct me to some caselaw on the effect of purchasing claims in bankruptcy, particularly the following two aspects: A and B have a contract. A breaches contract, and breach forces B into bankruptcy. C purchases B's breach claim against A for $50K. Assuming A has some counterclaims against B, may A 1) assert them against C, 2) assert them against C only by way of set-off, or 3) only assert them against B. B is in bankruptcy. B has a 1983 claim against A. Can the trustee for B assign that action to C?

A. That counterclaims by way of setoff and recoupment (two distinct sorts) are core issues to be heard by the bankruptcy court is federal bankruptcy law. The merits of the setoff or recoupment will probably be determined by state law. In all states except Florida, the limit of recoupment is the value of the amount claimed in the bankruptcy, but the statute of limitations on the counterclaim will be waived by the filing of a claimin bankruptcy. The principal requirement is that the two claims arise from the same transaction. It is up to the trustee to decide what to do about the tort (or breach of contract, it could be either or both) claim. He/she could sell it (as may have happened in your hypo) or abandon it back to the debtor.=20 Whether the claims can be offset, and whether A can assert his claim against the assignee depends (again under state law) to the connexity of the two claims. Without more facts, and enough info to know what jurisdiction's law applies, no case citations could be useful. You might start your research with American Law Reports, Annotated, which has covered this field over the years (your nearest law library should have it, along with a comprehensive index.

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