6 August 2026
Set-off is a legal mechanism whereby two parties who owe each other obligations may offset their mutual claims and debts. In an ordinary commercial relationship this is, in principle, unproblematic. However, once bankruptcy proceedings are involved, different rules apply.
In bankruptcy proceedings, the principle of equality of creditors (paritas creditorum) applies. However, through sett-off a creditor may effectively create a preferential position in the bankruptcy, as the creditor benefits itself at the expense of other creditors.
Under Article 53 of the Dutch Bankruptcy Act (Faillissementswet), a party who is both a creditor and a debtor of a bankrupt entity may, in certain circumstances, set off its claims. This gives the creditor of the bankrupt estate an advantage, because the claim is satisfied through set-off.
It is sufficient that both the debt and the claim already existed at the time of the declaration of bankruptcy, or arise from transactions carried out with the bankrupt enitity prior to the declaration of bankruptcy. If this is not the case, set-off is not permitted.
If you do not have a claim against your creditor but foresee the possibility of that creditor’s bankruptcy, you might consider acquiring a claim against that creditor from a third party in order to set it off later. By doing so, you effectively create the possibility of set-off, preventing the future bankrupt entity from having a claim against you.
To prevent this, Article 54 of the Dutch Bankruptcy Act provides that a person who acquires a debt owed to the bankrupt entity or a claim against the bankrupt entity from a third party before the declaration of bankruptcy may not set it off if they did not act in good faith when acquiring it. Debts acquired after the bankruptcy declaration cannot be set off at all.
Article 54 of the Bankruptcy Act aims to exclude set-off where a claim from a third party is acquired specifically to create the possibility of set-off. In such cases, the creditor’s position would otherwise be unjustifiably improved. The rule therefore protects the equality of creditors.
A person is not acting in good faith if, at the time of acquiring the claim or debt, they knew that the debtor was in such a financial condition that bankruptcy was to be expected. The same applies if the person did not know this but reasonably should have known that the debtor was in such a condition.
When assessing this, all the circumstances of the case must be taken into account.
If set-off is not permitted, both the debt and the claim remain in place and the set-off does not take effect. The creditor’s claim against the bankrupt entity may be submitted for verification in the bankruptcy proceedings, while the claim of the bankrupt entity against the debtor may be collected by the estate. This ensures the equal treatment of all creditors.
If you are an entrepreneur dealing with a bankrupt customer, supplier or business partner, keep the following in mind:
Set-off is a powerful legal tool. The Dutch Bankruptcy Act allows set-off, but only under specific conditions. Are you dealing with a bankrupt counterparty or unsure whether set-off is permitted in your situation? Please feel free to contact me or one of the other insolvency specialists at GMW advocaten to discuss your options.
Have your situation assessed by a legal expert. The possibility of set-off depends on all the circumstances of the case.
Only if you act in good faith. Do you already expect the insolvency? Then you are not allowed to set off.
In that case, the debt to the insolvent party remains in place. The liquidator can still demand payment. Your own claim against the insolvent party can be submitted in the insolvency proceedings.
