In the 1944 case Herget, Trustee in Bankruptcy v. Central National Bank & Trust Co., the U.S Supreme Court ruled on a matter involving bankruptcy and banking laws. The dispute arose when Central National Bank & Trust Co. set off its claim against a bankrupt's deposit before receiving notice of bankruptcy but after an involuntary petition had been filed against him. The bank argued that it was not aware of the filing at the time they offset their claim, hence should be allowed to keep the funds from his account as payment for his debt to them. The court held that even though Section 68a of the Chandler Act allows banks to offset debts with deposits upon learning about a customer’s bankruptcy, this right is subject to Section 70e which invalidates any transfer made after filing if it occurs within four months prior to filing and while insolvent or results in preferences over other creditors. Therefore, since there was no actual notice given by either party regarding insolvency or preference until after setting-off occurred (which happened post-filing), such action could not stand under law because it resulted in preferential treatment contrary to intended equitable distribution among all creditors during liquidation process under bankruptcy proceedings.

In the dissenting opinion for Herget, Trustee in Bankruptcy v. Central National Bank & Trust Co., Justice Robert H. Jackson argued that the majority's decision was inconsistent with previous rulings and undermined bankruptcy law principles. He contended that a debtor should not be able to prefer one creditor over another by transferring assets before declaring bankruptcy, which is what happened in this case when a farmer transferred his livestock to repay a bank loan shortly before filing for bankruptcy. The majority ruled that because state law allowed such transfers, it did not violate federal bankruptcy laws; however, Justice Jackson disagreed and believed this interpretation could lead to abuses of the system as debtors might manipulate their asset distribution prior to filing for bankruptcy.