Today I want to answer the question, “I’m filling out my schedules and the forms are asking if the claims against me are contingent, liquidated or disputed. What does that mean?”

Bankruptcy courts need to know the nature of the claims which are against the debtors, so in the form, they include a space for the debtor to indicate if a claim is contingent, unliquidated or disputed. My clients frequently ask me, “What does that mean?” A contingent claim means that it’s a liability that is not certain to occur and it’s only going to occur upon an event happening. The classic case of a contingent liability is the personal guarantee of a promissory note. If the main borrower under that note doesn’t default under the note, then the obligation under the guarantee will never arise. This means the obligation is contingent upon the occurrence of an event of default under the promissory note.

An interesting kind of contingent claim happens when you go to a casino. If you place a bet on roulette red or black, the minute you place that bet, the casino has a contingent claim owed to you based upon whether or not the ball lands on the red or the black or the green zero or double zero square. If the ball lands on the square that you bet on, the claim becomes matured and fully due. If the ball lands on a different square, the casino isn’t going to owe you anything. But during that interim period, the casino has a contingent obligation to you depending upon what happens where the ball drops.

My name is Ron Drescher and I’m an attorney practicing bankruptcy and commercial litigation. If you have a question about whether or not your claims are liquidated, disputed or contingent, please pick up the phone and call me at 410-484-9000. I’d love to hear from you.