Using the currency rules, 'penalty' dice that you pick up in mid-action (after you rolled but before the action occured) instead convert to bonus defense dice for whomever you're acting against.

1 penalty = 1 bonus = 1 victory = 1 die = 1 score point = 1 penalty = 1 bonus = 1 victory = 1 die = 1 score point ... ad infinitum

Learn it, love it.

Example

Two characters declare they're attacking each other. Both roll, leaving dice on the table. One wins initiative and the other chooses to Suck It Up and roll a 1 die defense. Result: he loses and suffers next-roll penalties. [1]

Provided his current total penalties do not exceed his Stamina and force him to lose his action, he gets to act. He's already rolled dice for his intended action, so they don't count as his "next roll" -- he gets his full unmodified dice roll to resolve his action.

Instead, the penalties just incurred apply as bonus dice for his target's defense roll.

1 penalty = 1 bonus = 1 die