In legal terms, what is recoupment?

Recoupment refers to the legal concept where a borrower has the right to deduct certain amounts from what they owe to a creditor, particularly during foreclosure proceedings. This typically occurs when the borrower can demonstrate that the creditor (often a bank) has failed to meet specific obligations, such as failing to comply with the terms of the loan agreement, which could include issues like not providing necessary maintenance or failing to protect the property from a loss in value.

In the context of foreclosure, if a borrower can prove that they have incurred damages or that the bank's actions have negatively impacted them, they may be able to recoup those amounts, effectively reducing the total they owe in that legal process. This right serves to balance the interests of the borrower against those of the lender and acts as a form of consumer protection.