Why Strangers Offer to Buy Your Claim in a Bankruptcy
A letter or email offers cash for your claim against a bankrupt company. How claims trading works, why the offer is a fraction of the amount owed, and how to check the buyer and the case.
Claim buyers are investors who offer to pay you cash now for the right to collect whatever the bankrupt company eventually pays on your claim. They find you through the public claims register and the debtor’s schedules, and they offer a fraction of the amount owed, betting the final payout will be higher. A sale is recorded in the court case under Bankruptcy Rule 3001(e).
Claims trading is legal and common in large Chapter 11 cases. Suppliers, landlords, employees owed money above the priority cap, and even customers with deposits receive these offers. The decision to sell is yours; this guide explains how the market works so you can judge an offer.
Why would someone buy my bankruptcy claim?
Because they expect to collect more than they pay. General unsecured creditors in Chapter 11 are paid under a plan of reorganization or liquidation, often a year or more after the filing, and the recovery can be anything from nothing to full payment. A buyer with time and legal staff takes that risk and the wait in exchange for a discount.
The price depends on the expected recovery and the time to payment. Offers are quoted in cents on the dollar: an offer of 25 cents on a $10,000 claim means $2,500 paid now and nothing more later. A claim with priority status, such as unpaid wages within the cap, can draw higher offers because priority claims are paid before general unsecured claims. Our guide to what employees are owed in a bankruptcy explains the wage priority.
How did the buyer get my name and claim amount?
From public court records. In a Chapter 11 case the debtor files schedules listing creditors and amounts, and every filed proof of claim goes onto a claims register. In large cases a court-approved claims agent posts both online, searchable by name. Buyers scan those lists and mail or email offers in bulk.
The letters often look official. Check the sender’s name: the court, the US Trustee and the claims agent do not buy claims, and an offer to purchase always comes from a private party.
How does a claim transfer work under Rule 3001(e)?
The buyer and seller sign a transfer agreement, and the buyer files evidence of the transfer with the court. The procedure depends on whether a proof of claim has already been filed.
| Situation | What the rule requires |
|---|---|
| Claim transferred before any proof of claim is filed | Only the buyer can file the proof of claim, in its own name |
| Claim transferred after a proof of claim is filed | The buyer files evidence of the transfer; the clerk mails notice to the seller |
| Seller disagrees that the claim was sold | The seller has 21 days after the notice is mailed to object; the court can extend the time |
| No timely objection | The buyer is substituted for the seller and receives future payments |
The court does not review the price. Under Federal Rule of Bankruptcy Procedure 3001(e)(2), the only issue on an objection is whether the claim was transferred other than for security. If you receive a transfer notice for a claim you did not sell, object within the 21 days.
What do you give up by selling?
You trade an uncertain future payment for a certain smaller one. The transfer agreement usually covers more than the price:
- All future distributions. If the plan later pays 60 cents and you sold at 25, the difference goes to the buyer.
- Voting rights. The buyer votes the claim on the plan.
- Repayment if the claim shrinks. Many agreements require the seller to refund part of the price if the claim is later disallowed, reduced or reclassified, sometimes with interest. Read this clause closely.
- Preference risk. If you received payments from the company in the 90 days before the filing, a later preference lawsuit can reduce the claim, and the agreement often puts that cost on you.
Whether to sell depends on how soon you need the cash and how the case is going. A bankruptcy attorney can review a large claim agreement before you sign.
How do you check the offer and the case?
- Find the case on the claims agent’s website, using the company name and “restructuring” or “claims agent,” or through PACER. Our guide on how to file a proof of claim shows where these sites list claims.
- Look up your own entry: the scheduled amount, whether it is marked disputed, contingent or unliquidated, and any proof of claim you filed.
- Read the latest disclosure statement, if one has been filed. It usually gives an estimated recovery percentage for each class of creditors.
- Compare the offer with that estimate and with the expected timing of payment.
- Check the buyer: a real business address, a named contact, and other transfer notices it has filed in the same or earlier cases on the docket.
- Never pay a fee to sell a claim. Legitimate buyers pay you; they do not ask for upfront charges.
Is selling different in Chapter 7?
The mechanics are the same, but offers are less common. Chapter 7 cases are usually smaller, and a trustee’s liquidation often pays unsecured creditors little or nothing. For the differences between the two chapters, see Chapter 11 vs Chapter 7.
Bottom line
The disclosure statement’s estimated recovery for your class is the benchmark for any offer. If you sell, keep a copy of the signed agreement and watch the docket for the buyer’s transfer filing, since the clerk’s notice is your chance to correct the amount or object if the paperwork does not match what you signed.
FAQ
Is it legal to sell a bankruptcy claim?
Yes. Claims are assignable, and Rule 3001(e) sets out how a transfer is recorded in the case. Some plans and court orders add trading procedures in specific cases, which the docket will show.
Do I have to file a proof of claim before selling?
No. A claim listed in the debtor’s schedules can be sold, and if no proof of claim has been filed the buyer files one in its own name.
What if I sold and the plan pays more than expected?
The upside belongs to the buyer. The sale price is final unless the agreement has a clause that adjusts it, which is rare in the seller’s favor.
Can I sell a gift card or deposit claim?
Customer claims can be sold like other claims, but small amounts rarely attract buyers. Many customer deposits also get priority up to a cap, which can make filing a claim yourself the simpler route.
