So, you've received a notice from the Bankruptcy Court that someone you've done business with, or a friend or relative you've loaned money to, or someone you never heard of filed bankruptcy. You read our article You Just Received Notice in a Bankruptcy Case in which we explained what the notice means and how to understand the information in it. And, maybe you've even read our article Are You a Creditor? Don't Do This is a Bankruptcy Case.


 

Now, you need to know what it means to be a "creditor" in a bankruptcy case. But first, we need to talk about an even more basic concept: claims.  

What is a "claim"?

Often, when we talk about bankruptcy claims, that's a shorthand version of the term "Proof of Claim". A Proof of Claim is the form that a creditor files in a bankruptcy case to show that the debtor (the person who filed the bankruptcy case) owes the creditor money.

For more information on filing a proof of claim form, see Protecting Your Rights: Filing a Proof of Claim Form and What is a Proof of Claim?

But the term "claim" is even more basic. It's how we refer to the debt that the Proof of Claim represents.

The Bankruptcy Code (the federal law that governs most of the bankruptcy laws in this country) explains that a claim is a

1. right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or
2. right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.

See 11 U.S.C. Sec. 101(5).

How do you know if you have a right to payment? That is defined under state law and according to any agreements, contracts, documentation, etc, you may have.  It might arise because someone owes you money, like alimony or a personal loan. It might arise because someone owes you a duty, like a duty to keep you safe from bad products or a duty to pay child support. Other claims arise under federal or state law, like income taxes or fines for traffic violations or code enforcement.  

Here are some examples of claims that are commonly found in bankruptcy cases.

• Mortgages
• Car loans
• Mechanics liens
• Fines and restitution
• Income taxes
• Property taxes
• Traffic tickets
• Bad checks
• Credit card debt
• Medical bills
• Personal loans
• Student loans
• Alimony
• Child Support
• Unpaid utilities
• Unpaid rent

 

Bankruptcy claims also include obligations that have not necessarily been reduced to a monetary value:

• Personal injuries
• Property damage
• Breach of a contract
• Negligence claims
• Product liability claims
• Car accidents
• Mass tort claims, like asbestos, medical device, prescription drug claims.

Here are some more definitions that might shed light on the terms used in the definition of “claim”:

Reduced to judgment: when a judge orders one party in a lawsuit to pay or to give property to the other party to satisfy some obligation.

Liquidated (fixed) or unliquidated: whether the debt is for a specific amount or money, or whether the amount of money or the value of the claim has not been determined. For instance, debt for a credit card might be liquidated, but a debt for a breach of a real estate contract may not be determined yet.

Contingent: the debt is not owed unless a triggering event occurs. For instance, as to a co-signer, a debt is contingent until the primary borrower fails to pay.

Matured or unmatured: a debt that is due and owing at present is matured; one that will come due in the future is unmatured.

Disputed or undisputed: is you agree that the debt is owed on all terms, it is undisputed. If you disagree with any of terms, It is disputed.

Equitable: an equitable claim is a claim that usually arises from something other than money, but may eventually be reduced to a monetary claim. For instance, you may ask a court to order your neighbor to trim his trees. The court may order the neighbor to do just that, or the court may order the neighbor to reimburse you for having to take care of it. 

Secured or unsecured: claims are secured when the borrower (or someone else) agrees to back up the loan with collateral so that if they borrower does nott pay the loan, the lender can sell the collateral to get his money back. Unsecured claims have no collateral.

Knowing that you have a "claim" is only half the puzzle. The next piece determines whether you're a "creditor". Check this out:  Protecting Your Rights in a Bankruptcy Case: Who is a "Creditor"?