Larry, Moe, and Curly
Faith, hope, and charity
Tinkers, Evers, and Chance
In bankruptcy, the trio is unliquidated, contingent, and disputed.
They’re the prescribed adjectives for describing claims on the schedules. We all love adjectives, don’t we?
The definition of contingent, in our context, focuses a right dependent on the occurence of some future event. A creditor holding a contingent claim is entitled to have it estimated for purposes of allowance in a bankruptcy case.
c) There shall be estimated for purpose of allowance under this section—(1) any contingent or unliquidated claim, the fixing or liquidation of which, as the case may be, would unduly delay the administration of the case; §502(c)
Labeling a claim as disputed gives the trustee a heads up as to the appropriate treatment of the claim should there be a distribution to creditors in that class. But more important, it raises the question of whether scheduling the claim, without noting it as disputed, constitutes an admission of the validity of the claim in the amount scheduled.
This seems to be a Procrustean dilemma, depending on your judge’s inclinations. Dispute all claims, as to the calculation of the amount, and you risk a challenge to your good faith. Fail to challenge the amount set out on the creditor’s bill and you may have admitted liability in that amount.
Here, it pays to know local inclinations and to anticipate, at the schedule preparation stage, what litigation looms.
Unliquidated is the power lifter in this trio, in the Chapter 13 context. Claims that are unliquidated are excluded from the debt calculation for Chapter 13 eligibility.
Only an individual with regular income that owes… noncontingent, liquidated, unsecured debts of less than $250,000 and noncontingent, liquidated, secured debts of less than $750,000, or an individual with regular income… may be a debtor under chapter 13 [debt limits outdated]
The implications here are powerful: your client could have been the undisputed cause of a horrific negligent tort and still qualify for Chapter 13 relief if the amount of damages remains to be determined. (note that contingent debts are excluded from the calculation as well, but in my experience, that is a far less common fact pattern).
Choose your words carefully. You may have to live with them.
Image courtesy of mape_s