Setoff
Setoff: A right to reduce an amount owed to another person by an amount that person owes in return, so that only the difference is paid. For example, a bank may set off a customer's deposit against a matured debt the customer owes the bank, subject to legal limits. The Bankruptcy Code preserves certain prepetition setoff rights, with exceptions (11 U.S.C. § 553). Also called offset.
What setoff means
Put simply, setoff is part of the working vocabulary of a civil case. The short definition above covers the usual meaning. Still, a specific rule, statute or contract can give it a narrower meaning. For that reason, check how it is used in your own documents.
Where setoff comes up
The term is used across many kinds of cases. For example, you may see it in pleadings, motions and court orders. To see it in context, browse the motions and procedures library or the Learn the Law topics.
How to research the term
Start with the primary source. For example, if setoff appears in a federal rule, read the rule itself and its official notes. After that, check your court’s local rules and any standing orders from the judge. In addition, search recent decisions from your own state or federal district. They show how courts read setoff in practice. Because state rules often differ, our state procedures guide links to each state’s official rules. Above all, make sure the version you read is still in force.
You can read the current federal court rules online for free.
Related legal terms
- Security interest: an interest in personal property that secures payment or performance of an obligation, governed by UCC Article 9.
- Self-settled trust: a trust in which the settlor is also a beneficiary. In most states, the settlor's creditors can reach whatever the trustee could pay to or for the settlor (Uniform Trust Code § 505(a)(2)). A few states allow domestic asset protection trusts as a statutory exception.
- Service of process: formally delivering the summons and complaint to a defendant in a way the rules allow.
- Servicer: the company that collects payments and handles the day-to-day administration of a loan on behalf of its owner.
Why precise terms matter
Courts read legal terms closely. As a result, knowing the exact meaning of a word helps you follow orders, rules and filings. Each glossary entry on Lawtopolis is short on purpose and links to the pages where the term is used.
Sources
Sources last reviewed: 2026-10-24
Lawtopolis provides legal information and education, not legal advice. Using this site does not create an attorney-client relationship. Laws and court rules vary by jurisdiction and change over time; verify every authority against the official source and consult a licensed attorney in your jurisdiction about your situation.