Types of Creditor Claims in Minneapolis

The U.S. Bankruptcy Code has a specific definition of what it considers to be a legitimate claim in bankruptcy. This definition, however, gives little or no practical advice on the different types of creditor claims in Minneapolis.

For more than 40 years, the skilled bankruptcy attorneys at Walker & Walker Law Offices, PLLC have advised individuals on issues regarding various types of claims and how they might be resolved through bankruptcy proceedings. If a creditor is making claims that can impact your income or assets, you should discuss this issue with our lawyers. Contact our team today to schedule your free consultation.

How Are Creditor Claims Categorized in Bankruptcy Proceedings?

A Minneapolis bankruptcy court will generally categorize different types of creditor claims as follows.

Secured Claims

These claims apply to credit attached to real estate, a physical asset such as a vehicle, or intangible assets such as business receivables. Borrowers who fail to make payments on secured loans risk losing the asset that backs the loan.

Unsecured Claims

Unsecured claims are general obligations of the debtor that are not coupled to a defined asset. Credit card debt and invoices for medical services are common unsecured creditor claims in bankruptcy proceedings.

Priority Claims

These claims are for payments defined by law that take precedence over other claims. Alimony and child support, which are generally unsecured, are always given a priority preference.

A bankruptcy attorney at Walker & Walker Law Offices, PLLC can help you understand the types of claims that creditors might have against you and how a court would treat those claims through the bankruptcy process.

How Do Bankruptcy Courts Handle Contested Claims?

When a Minneapolis debtor challenges the legitimacy of any type of creditor claim, a bankruptcy court will hear evidence to resolve the dispute. An experienced bankruptcy attorney is crucial to protect a debtor’s interests when these challenges arise. You should consult with Walker & Walker Law Offices, PLLC if you believe a creditor’s claim is not in good faith.

A secured claim can face a hybrid challenge if the value of the asset securing a loan is lower than the loan’s outstanding principal balance. For example, this might occur when a vehicle depreciates more quickly than the amount of the loan principal. In these situations, a court might divide the creditor’s claim into a secured component with a value that matches the vehicle’s appraised value and an unsecured component for any amount above that value.

Further, a claim that is dependent on some future event might not have matured at the time of the bankruptcy filing. If you guaranteed or co-signed a loan for another party, the creditor’s claim depends on that party’s failure to make payments on the loan.

Why Understanding the Types of Creditor Claims Is Important

Different types of creditor claims are treated differently in Minneapolis bankruptcy proceedings. Secured or priority creditors, for example, are more likely to get a larger recovery than unsecured creditors, who might be forced to settle their claims for a low amount.

A knowledgeable attorney can use this information to resolve claims before a debtor files a bankruptcy petition. Unsecured creditors that aggressively pursue debt collections might settle claims on terms that are fair to a debtor when an attorney convinces them that a pre-bankruptcy settlement will give them a larger recovery.

Call a Minneapolis Attorney About the Types of Creditor Claims

If you still have questions, our attorneys can provide more information on the types of creditor claims in Minneapolis. Please contact our team at the Walker & Walker Law Offices, PLLC today to schedule a consultation and discuss how the categorization of creditor claims may affect your potential bankruptcy case.