Burr Alert: When is a Claim a "Claim"?

October 23, 2012

By Andrea Weed

The ability of a debtor to discharge future or unknown liabilities, or claims, in the bankruptcy process is an integral aspect of the "fresh start" envisioned by the Bankruptcy Code. However, determining when a claim is a "claim" under the Bankruptcy Code is not always simple. In light of the Code's broad definition of a "claim,"1 which includes even unmatured and unliquidated rights to payment, it is possible for unknown or future creditors to have a claim against the debtor to be administered in the bankruptcy case.2

These potential creditors – those who have been exposed to the debtor's harmful conduct or defective product but who have not suffered any resulting damages at the time of the bankruptcy case – may later find that their claims have been discharged without their knowledge, and that they cannot recover from the debtor post-bankruptcy. Accordingly, determining what constitutes a "claim" and when it arises is critical for both debtors and creditors alike. Courts across the country use different tests to make these determinations, focusing on factors such as when a claim accrues under applicable state law, the nature and timing of debtor's harmful conduct, or the nature and timing of the relationship between the debtor and the claimant giving rise to the injuries suffered.3

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