What Are Different Claims in a Bankruptcy Petition?

Today, we are going to discuss some of the basic definitions the knowledge of which is required to settle claims under various bankruptcy petitions.

(1) Insider — Debtors should refer to section 101(31) of the Bankruptcy Code for the definition of a “insider.”

(2) Secured Claim — A claim is secured if the creditor has a lien on property of the debtor (collateral) that gives the creditor the right to be paid from the property before creditors who do not have liens on the property. A claim is secured only to the extent to which the value of the creditor’s interest in a property equals the amount of the debt. Any amount not protected by collateral is unsecured. 11 U.S.C. § 506. Examples of liens include a mortgage on real estate and a security interest in a car, boat, television set, or other item of property. A lien may have been obtained through a court proceeding before the bankruptcy case began; in some states a court judgment is a lien.

(3) Unsecured Claim — If a claim is not a secured claim, it is unsecured. A claim may be partly secured and partly unsecured if the property on which a creditor has a lien is not worth enough to pay the creditor in full.

(4) Contingent Claim — A claim is contingent if the debtor’s liability depends on a occurrence of a certain event, such as when the debtor is a co-signor on another person’s loan and that person fails to pay.

(5) Unliquidated Claim — An unliquidated claim is a claim the amount of which is not completely certain. The claim exists, but the amount is presently unknown. For example, a debtor may have been at fault in a car accident, but there is no judgment yet establishing the
amount of the debtor’s liability. The debtor will have to estimate the amount of such a claim and designate it as unliquidated.

(6) Disputed Claim — A claim is disputed when the debtor and creditor do not agree on the debtor’s liability or on the amount of the debt.

(7) Setoff — A “setoff” is when all or part of the debt owed by the debtor to the creditor is “canceled out” by a pre-existing debt owed by the creditor to the debtor.


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