In the case of First National Bank of Paducah, Kentucky v. Martin, Trustee in Bankruptcy of Atkins (1914), the U.S. Supreme Court was tasked with determining whether a bank could claim priority over other creditors for funds deposited by an insolvent debtor shortly before declaring bankruptcy. The bank argued that it had a right to set off the deposits against its own claims on the debtor's assets because it was unaware of his insolvency at the time he made them. However, Justice Holmes ruled in favor of Martin, stating that under federal law and policy regarding bankruptcies, all unsecured creditors should be treated equally unless there are compelling reasons otherwise. Therefore, any preferential treatment given to one creditor over others would undermine this principle and is not permissible under bankruptcy laws.

The dissenting opinion in the case of First National Bank of Paducah, Kentucky v. Martin, Trustee in Bankruptcy of Atkins argued that the majority's decision was not consistent with established legal principles and precedent. The dissent contended that a bank should be allowed to set off its debts against those it owes to a bankrupt customer before distributing any remaining funds to other creditors. It asserted that this right is inherent in every debt and does not depend on possession or control over specific property belonging to the debtor. Furthermore, it disagreed with the majority's interpretation of bankruptcy law as intending to prevent such set-offs, arguing instead that these laws aim at equitable distribution among all creditors rather than favoring one over another.