Contingent Claims and Jurisdictional Limit in Chapter 13

A debtor can only have approximately $360,000 in unsecured debt to be eligible for a chapter 13. Otherwise, the debtor is above the jurisdictional limit.

Contingent claims do not count against the calculation. The problem is that the bankruptcy code does not define what is considered contingent or non-contingent.

A recent case may help debtors under the right facts. Consider a debtor who signed a guarantee for a corporation. Does the amount of the guarantee count as a non-contingent claim? In Glaubitz v Grossman, 2011 US Dist Lexis 6166(E.D. Wisc. 2011), the district court reversed a bankruputcy court decision. The bankruptcy court had included the guarantee as part of the unsecured debt. The district court reversed, finding that a guarantee was inherently contingent. However, the District Court stresses that the corporation was not in default so the contingency had not yet occurred. If a default had taken place, then the guarantee would no longer be contingent and would count against the jurisdictional limit.

As a Fort Lauderdale bankruptcy attorney, I recognize that the problem is that in the typical case where the debtor made a guarantee for his own corporation, the debtor is likely already in default.

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