What is claims trading in bankruptcy?

Something that has become very popular among creditors in bankruptcy is something called claims trading This involves selling and buying the claims of other creditors. Even a creditor not involved in the bankruptcy may wish to buy the claim of a creditor that is owed money by the debtor.

What is a bankruptcy claim?

In most cases, a bankruptcy claim is an amount that a creditor hopes to recover from bankruptcy funds. The claim is unliquidated if the creditor doesn't know how much the debtor (bankruptcy filer) will eventually owe. Some factor prohibits the creditor from establishing the final amount.

What is a claims bar date in bankruptcy?

The bankruptcy court typically sets a claims bar date, a firm deadline by which a creditor must file a proof of claim or forever be barred from asserting a right to payment. Do not miss this deadline. There is no penalty for filing early, but filing late can be a reason for a filed claim to be eliminated.

What are the different types of claims trading?

Therefore, the vast majority of claims trading centers around trade claims, which are unsecured obligations of the debtors. Examples of unsecured claims include riskier debt instruments and general unsecured claims (“GUCs”) such as those held by suppliers/vendors. The pricing discounts are more profound the lower one goes in the capital stack.