Mutual Debts

Mutual debts refer to financial obligations that two parties owe to each other. For example, if Person A owes Person B $100, and Person B owes Person A $40, both debts can be settled against each other. Instead of making separate payments, the balance can be simplified: Person A would owe Person B $60 after offsetting the debts. This concept is often used in legal and financial contexts to streamline transactions and reduce the complexity of settling accounts. Essentially, mutual debts can be netted out to determine a single amount owed in one direction.