But She’s Not a Creditor!

An unliquidated tort cause of action is just as much a “claim” for bankruptcy purposes as a credit card bill. Not all creditors send monthly bills  I reminded  my rookie lawyer friend.

My friend’s fact pattern was a bit more complex than the more common unresolved auto accident:  an exspouse was complaining that a title company mix-up left the property the ex got in the property division encumbered with the client’s  new loan, rather than the client’s property. 

The young lawyer’s first reaction was that the ex wasn’t a creditor who could bring a non dischargeability suit.

The statutory definition of claim in 101(5) is very broad:

I like to think of it as any complaint that could be solved by payment of money.  The next subsection of the definition goes on to say that a claim includes:

(B) 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.

So, in my friend’s case, the ex’s complaint about the equity in her home being wrongfully reduced by the errant lien certainly falls within this definition.  It’s an entirely different question whether this is a non dischargeable debt or even whether the debtor is the one responsible.

Add to the teaching of Johnson v. Home State that a claim isn’t limited to debts for which there is personal liability, the proposition that a claim needn’t be contractual, liquidated , or  undisputed to be a claim within the meaning of the code.

Further, there is no apparent down-side to listing a claim that may not be a claim, or for which there is no liability on the schedules. And lots of downside to omitting a creditor.

Add to your intake procedures questions that flush out the sort of dispute or financial exposure that isn’t the subject of a monthly bill.

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Creditors with in rem claims

Image courtesy of  shuets udono