Bankruptcy, Discharge, Recoupment of Pre-Bankruptcy Overpayment from Blameless Debtor, 2, 3
Despite the discharge injunction, a creditor may recoup pre-bankruptcy debts by offset against post-bankruptcy payments. The equitable recoupment doctrine allows recovery of a discharged debt where the creditor and debtor share countervailing obligations that meet the logical relationship test. Under that test, obligations are logically related when they arise from the same transaction or occurrence such that recoupment is equitable. However, recoupment is inequitable and impermissible where, as here, the Social Security Administration seeks to recoup overpayments from a bankrupt beneficiary who engaged in no malfeasance.