Kansas City Bankruptcy Attorney

When is a Bankruptcy Claim Contingent, Unliquidated, or Disputed?

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When is a bankruptcy claim contingent, unliquidated, or disputed?” It’s a question many individuals find themselves asking as they stand at the crossroads of financial decisions. 

Fortunately, in the heart of Kansas City, Missouri, we at Jeppson Law Office can help. Our dedication to guiding individuals through these tricky waters of bankruptcy law is sincere. 

For a clear, concise understanding and a roadmap to better financial decisions, contact us at Jeppson Law Office today for a free consultation schedule. We are here to help you handle bankruptcy with confidence.

Understanding Bankruptcy Claims

At its core, a bankruptcy case revolves around claims. Any bankruptcy claim can appear intimidating. But, once you break it down, it’s the essential bridge between a debtor (someone who owes money) and their creditors (those to whom money is owed). 

During the Meeting of Creditors or 341 hearing, the nature of these claims may be discussed or questioned. To effectively navigate such meetings, it’s essential to understand the different types of claims.

What is a Bankruptcy Claim?

A bankruptcy claim is a formal assertion by a creditor stating that they’re owed a certain amount by the debtor. It represents the creditor’s right to receive a portion of their owed money from whatever assets the debtor possesses or future earnings, depending on the type of bankruptcy filed.

Secured vs. Unsecured Claims:

Claims can fall into two primary categories:

  • Secured Claims: These are backed by collateral. Think of a car loan or a mortgage. If you default, the creditor can seize the car or house to recoup their losses.
  • Unsecured Claims: These aren’t backed by any specific asset. Credit card debts are a prime example. If you default on your credit card payment, the company can’t immediately take any of your possessions. However, they can sue and, if they win, potentially claim your assets.

Priority of Claims:

It’s important to note that not all claims are treated equally. Some get priority over others. In many cases, secured claims will be paid out before unsecured claims. Understanding this hierarchy is crucial because it determines who gets paid, how much, and in what order.

The Role of Proof of Claim:

For creditors to assert their rights in bankruptcy, they typically need to file a “Proof of Claim” with the court. This document outlines how much they believe they’re owed and why. It’s the basis upon which distributions are made in a bankruptcy case.

While bankruptcy claims might initially seem intimidating, they play an important role in financial restructuring. They determine how assets are divided and ensure that as many debts as possible are settled orderly.

Defining Contingent, Unliquidated, and Disputed Claims

In the bankruptcy world, claims can be categorized into three main types: contingent, unliquidated, and disputed. Let’s break these down.

What Makes a Claim ‘Contingent’?

When dealing with bankruptcy claims, one might come across the term “contingent.” But what does it mean in this context? A contingent claim is not based on any existing obligation. Instead, it’s based on a future event that may or may not happen. The best way to grasp this is to look at real-life scenarios:

Imagine you co-sign a loan for a friend. As a co-signer, you’re essentially vouching for the primary borrower and promising to step in if they default. If everything goes well and your friend keeps up with their payments, you owe nothing. However, should they fail to pay, you become liable. Your obligation to pay is “contingent” upon your friend’s potential default.

What is an ‘Unliquidated’ Claim?

While “unliquidated” might sound like a term only financial experts would understand, it’s relatively straightforward. An unliquidated claim is one where the exact amount owed is unknown. This uncertainty can arise for several reasons:

Consider personal injury lawsuits as an example. Someone might sue another party after an accident. At the onset, it’s unclear how much in medical expenses, lost wages, or pain and suffering the injured party might accumulate. Only after careful evaluation and sometimes lengthy court proceedings is the exact value determined.

Another example is when a business undergoes a contract dispute. The owed amount might remain undetermined until both parties reach an agreement or a court makes a judgment. The claim remains “unliquidated” in these scenarios because its exact value hangs in the balance.

What is a Disputed Claim?

In the world of bankruptcy, not all claims go uncontested. Sometimes, a debtor might not agree with a creditor on the legitimacy or amount of a claim. This disagreement leads to what is termed a “disputed” claim.

Disputed claims can arise for several reasons:

  • Existence of Debt: The debtor might believe that no debt exists at all, challenging the very foundation of the claim.
  • Amount of Debt: While both parties agree a debt exists, they might disagree on how much is owed.
  • Terms of the Agreement: Differences in interpreting the terms of a loan or credit agreement might lead to disputes.


Resolving these disputed claims is crucial. They can delay bankruptcy proceedings, as they often require extra steps for resolution. Typically, these disputes get resolved through negotiations between the debtor and the creditor. If talks fail, the bankruptcy court might have to examine evidence from both sides and then decide.

Why Does Claim Status Matter in Bankruptcy Proceedings?

The journey through bankruptcy is heavily influenced by the nature of the claims involved. Each claim’s status plays an important role in the overall process. For example, certain creditors can vote on their approval when a debtor proposes a plan to repay their debts. This voting ensures creditors have a say in their repayment terms. 

However, contingent and unliquidated claims might be sidelined from this voting process until their value or status becomes clear. Disputed claims introduce another layer of complication. These claims, which disagree with their existence or amount, must be resolved before the debtor can proceed to a discharge. So understanding the details of your claim’s status is crucial as it can shape your rights, the case’s progression, and its eventual outcome.

Need Help on Your Bankruptcy Claim?

Determining when a bankruptcy claim is contingent, unliquidated, or disputed can be a difficult task, regardless of whether it’s under Chapter 7 or Chapter 13. But you don’t have to do it alone. At Jeppson Law Office, we’re here to help you understand every aspect of your bankruptcy situation, no matter how complicated. Our experienced bankruptcy attorney will stand by your side, ensuring you’re informed and confident every step of the way.

Reach out to Jeppson Law Office today and take the first step toward resolving your financial challenges.

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