Claim In Bankruptcy Legal Meaning and Definition

Here is a simplified definition of the legal term Claim In Bankruptcy.

Claim in Bankruptcy (noun)

This is a legal term used to describe a formal request made by a creditor, the person or company owed money, when someone else initiates bankruptcy proceedings. In this context, the person or company who has declared bankruptcy is referred to as the debtor.

The creditor files a document with the court called a 'claim in bankruptcy' in order to make sure they are included in the distribution of any available money or assets that the debtor may have left. If the debtor does not have enough funds to satisfy all the claims, some claims may be rejected, or each creditor might receive only a portion of what they are owed.