A creditor's right to apply a debt owing to it by the debtor against a debt it owes to the debtor, if the parties owe each other mutual debts arising from the same transaction. The amount the creditor owes the debtor is reduced by the amount which is recouped. Unlike setoff, a creditor's right to recoupment is not subject to the automatic stay and prepetition claims can be withheld from postpetition debts.

For more information, see Practice Note, Creditors' Recoupment Rights in Bankruptcy.