Foreign bankruptcy representatives seeking to avoid setoff of fund transfers pursuant to section 553 of the Bankruptcy Code may enjoy more flexible standards than ever before. In a recent decision by the United States Bankruptcy Court of the Southern District of New York, In re Awal Bank, Judge Gropper allowed the foreign representative for Awal Bank to avoid a setoff by HSBC even though the bank had not filed a plenary chapter 7 or 11 bankruptcy proceeding within 90 days of the setoff, holding that Awal Bank’s filing under Chapter 15 within the relevant 90 day look-back period was sufficient to avoid the setoff. This memorandum explains how both HSBC and Awal Bank argued the main issues of first impression, how the bankruptcy court analyzed and decided these novel issues, and how the decision could potentially impact foreign bankruptcy proceedings in the future. Part I of this memorandum briefly describes setoff and when setoff may be disallowed. Part II explains the pertinent Bankruptcy Code provisions implicated in these situations. Part III discusses Awal and the main arguments of both parties regarding the issues, and Part IV discusses how the court came to resolve them. Part V concludes by examining how the court’s decision could impact creditors and debtors in potential set-off situations.