When is a debt a debt?

[KeithDoxen]

A friend who knew that I had some experience with bankruptcy relayed this question to me today. I didn't know the answer, but I thought that someone here might.

The question pertains to a debt to a car insurance company. An insurance company claims that a woman owes them 20,000 dollars for property damage that she caused while driving around while uninsured. She doesn't have 20,000 dollars, and is barely scraping by as it is (single parent, makes 25k a year, etc). She already has bad credit and some credit card debt and thinks that the only option she'll have if they come after her for the debt is to file for Ch 7.

My first instinct was that she shouldn't file until there is a judgment against her for the 20k, because that's the point at which the insurance company becomes a creditor. Am I wrong about that? Would filing a Ch 7, say, right now wipe away this debt? Is this 20k even legally a debt yet?

I get the impression this woman is sort of anxious to jump the gun and file, so any advice would be appreciated. I don't want to mislead her.

[13for60]

When I filed for Chap 13 I was told to list "any and all debts" with no mention of any judgements, etc. In thinking about it, I was current with all CC, etc when I filed, so there wasn't even a late payment on my record, then - WHAMMO - I file Chapter 13. From the creditors perspective I'm sure they never saw it coming (but I guess that's arguable since they know everything about everything...).

I guess where I'm going with this is that there were no judgements on me and I filed on like 20 creditors. It would seem that as long as she has the info (ionsurance company address, etc) and the estimated amount she can list them on her Chap 7. They get notified and she is free of any harrassing phonecalls, letters, judgements, etc.

Hope that helps!

13for60

[KeithDoxen]

Yes but with credit cards, you have legally binding cardholder agreements stating that the cardholder agrees to pay the amount that he or she borrows against the card, with interest, etc. So even without judgments you clearly have a debtor/creditor relationship. But what about a situation where an insurance company is telling an individual, "You owe us X amount of money!" There is no contract between the insurer and the individual (this is the insurer of the vehicle she hit). Is this even a debt yet?

[HHM]

A debt = claim.

Claims can be liquidated or unliquidated; claims can be contingent or non-contingent; and claims can be disputed.

Liquidated = the amount of debt is known or reasonably certain
Contingent = Some future event must take place before the debt actually become due (at least, that is the best way to think about). For example, a lender only has a contingent claim against a co-signer of an auto loan. The claim is contingent because the primary borrower must default before the lender may pursue the cosigner. the debt is not live as against the co-signer until the primary borrower defaults.
Disputed = self explanatory, someone is asserting a claim against the debtor, but the debtor disputes something about it, its amount, validity, etc.

The insurance company is alleging a "claim" against her, and that IS a type of debt. Since she was uninsured, this isn't her insurance company. The real question, did she actually do what was alleged, if yes, then it is at least a non-contingent claim. I don't know that I would wait to file until "judgment", but certainly, if the debtor gets sued, then file.

[13for60]

Verbal agreements count. The debate would be in court after the 341 if the parties couldn't agree on the correct amount. People list loans from family members all the time and there is no signed agreement involved.

Legal issues are laughable sometimes, but the reality is the law has a solution for pretty much any scenario that can be conceived. I'm just a Google-trained Bankruptcy Expert, but I would wager that she can list them and the amount they demanded and list them as a creditor on the petition.

My humble opinion only, of course. That and $5 will g et you a latte.

--13for60

[KeithDoxen]

This is all very useful information that I will pass along. Thanks guys.

[ashleywatson]

Chapter 11 and chapter 13 is really very tough topics. This is really good to have knowledge on these topic.