14.2. Claims and Interests

In bankruptcy, if you have a right to a piece of the debtor’s assets, it is either because (1) the debtor owes you money, or (2) you have an ownership stake in the debtor. If your right to part of the assets is based on debt, you are said to have a claim. If it is based on equity, you are said to have a residual interest, sometimes just called an interest. The term comes from the word “residue,” because it is an interest in whatever is left after the creditors have been paid. (A residual interest is different from a security interest, discussed in Appendix A’s section on corporate bonds. A security interest is a right t