The Difference Between Contingent, Liquidated, and Disputed Debt

When you file for bankruptcy, there is a lot of paperwork to complete, but most of it is straightforward. You need to indicate your income and monthly expenses, itemize your assets and debts, and explain the circumstances of any recent property transfers. 

Contingent debts are undefined liabilities, and is a debt that may or may not occur based on future events. This differs from unliquidated debts, which are owed based on the terms of an existing contract or dispute. Lastly, disputed debt is one that a creditor may say is owed, but you disagree.

Below, we’ll further explain the differences between contingent, liquidated, and disputed claims and how they can affect a bankruptcy case.

Contingent Debts

Contingent debts are owed in the future, depending on whether a certain event takes place. One common example is a debt that you cosigned for another party. If they default, you become responsible for repayment, but as long as the borrower maintains the payments, you may never owe that debt.

Unliquidated Debts

With unliquidated claims, you know that you owe the debt, but are not sure exactly how much it amounts to at the time you prepare the bankruptcy petition. Examples include:

  • You retained a professional who charges an hourly rate and the job has not been completed yet, so you won’t know the final bill until then.
  • You admitted to liability in (for example) a personal injury lawsuit, but the case is still in progress and damages have not yet been calculated.

Although you may not know exactly how much you will ultimately owe, including an unliquidated claim in your bankruptcy petition will help ensure that it gets discharged along with your other listed debts.

Disputed Debts

It sometimes happens that people file bankruptcy while in the middle of a dispute with one or more creditors. You may believe that the amount they are demanding is too high, or you may not even owe the debt to begin with. Regardless of the cause of the dispute, these debts must be listed, even if you know you didn’t incur them. What matters is that the creditor believes you do, and if it does turn out to be a valid claim, it can be included in the petition for a future discharge.

If any of your debts are disputed, list the amount the creditor is demanding instead of what you believe you may owe. This doesn’t mean that you are agreeing with their assessment: you just want to make sure that you get discharged from it at the end.

Contact the Bankruptcy Attorney Team at Maxwell Dunn PLC

While most Michigan bankruptcies are straightforward, others involve claims with special circumstances attached. A bankruptcy attorney at Maxwell Dunn PLC will explain how to address these debts in your petition so that your discharge is not affected by them in the future. For more information or to schedule a consultation with a member of our team, contact us today.