What Your Claim is Actually Worth

Your bankruptcy claim has a market price—determined by institutions betting on recovery percentages, timelines, and litigation risk. The price you see on a trading platform reflects collective judgment about what your asset will eventually pay. Understanding that logic tells you whether to take the offer or hold.

The Valuation Formula

Claim value is driven by three variables:

Claim Value = Expected Recovery % × Claim Amount × Discount Factor

Example: $10,000 claim, 60% expected recovery, market paying 65 cents per dollar.

$10,000 × 60% × 0.65 = $3,900

That's your offer. Now, why those numbers?

Recovery Rate: The Driver

Everything hinges on recovery percentage—the percentage of your claim face value that the court will eventually distribute. It determines whether institutional buyers bid 10 cents or 70 cents per dollar. Factors:

Typical Recovery Rates by Claim Type

Crypto claims typically offer the best recovery rates because the underlying assets (crypto holdings) are often recoverable. Retail liquidations typically offer poor recovery because inventory is worth less than face value.

How Institutional Buyers Price Claims

Institutional buyers have a formula. They:

1. Analyze the bankruptcy filing, balance sheet, reorganization plan, and prior case comps
2. Model recovery scenarios (best, base, worst case) with probabilistic weighting
3. Calculate net present value of expected distributions (discounted to today's dollars using a risk-adjusted discount rate—typically 15–25% annually)
4. Research litigation risks: pending appeals, objections, motions to dismiss
5. Add a profit spread for risk and administration costs (typically 8–15%)
6. Submit their offer (e.g., 55 cents per dollar)

Buyers are betting that the secondary market is undervaluing your claim relative to actual recovery, or that they can extract better terms by holding to maturity. Their offer reflects their conviction, risk appetite, how many other competing buyers are in the market, and their cost of capital. A buyer with cheap funding (bank loans at 5%) will offer more than a buyer funding purchases with expensive capital (venture debt at 15%).

Here's the insider calculation: If a buyer offers you 55¢ for a claim they estimate will recover 60¢, they're not betting that recovery will hit 60%. They're betting on 60% + the ability to extract 2–3% more through claims trading arbitrage + the time value of money (they're willing to wait 18–24 months for recovery while you need cash today).

Why Claims Trade at a Discount

If recovery is 60%, why isn't every claim trading at 60 cents? Because:

• Time value: 60 cents today beats $1.00 in 3 years (you can invest the cash)
• Court risk: Litigation, appeals, plan reversals can torch distributions
• Certainty premium: Buyers pay a discount because holding to maturity has risk
• Admin drag: You don't want to monitor a bankruptcy for 3 years

Healthy cases: 5–10% discount. Risky cases: 20–40% discount. The weaker the recovery prospects, the deeper the discount off the theoretical recovery percentage.

Real-World Pricing Examples

Factors That Shift Claim Values

Claim prices fluctuate based on:

• New court rulings: A favorable ruling increases recovery expectations; an unfavorable one decreases them. A successful clawback motion against a former officer can unlock millions and spike claim values 15–20% overnight.
• Asset discoveries: If unexpected assets are discovered or previously frozen accounts are unfrozen, claim values jump immediately. Most claim markets price on publicly available information; private knowledge of asset discoveries gives sophisticated buyers an edge.
• Plan amendments: Changes to the reorganization plan affect recovery by claim class. If the plan shifts the waterfall so unsecured creditors get paid earlier (because secured claims are settled), unsecured claim prices spike.
• Market sentiment: Shifts in distressed debt buyer interest affect demand and pricing. When interest rates rise, buyers' cost of capital increases, and they lower offers (because they discount future distributions more aggressively). When rates fall, offers improve.
• Competition: More buyers in the market → better prices for sellers. A single buyer can bid 40¢. Ten competing buyers bid 50–65¢. Multiple competing bids create transparent pricing; single-buyer markets are opaque and favor the buyer.
• Timing to distribution: As a case approaches distribution, claim values converge with expected recovery percentages. When a claim is 5 years from distribution, pricing includes a steep discount. When distribution is 3 months away, prices narrow to within 2–3% of expected recovery.

Sell or Hold: The Decision

Sell if: You need cash, or you believe the market price is fair and the court risk is real. You exchange upside for certainty and liquidity.

Hold if: You believe recovery will exceed the market price AND you can afford to wait 18–36 months. The case has clear assets, fast timelines, and you have conviction in the recovery estimate.

Getting Your Claim Valued

To find out what your claim is worth:

1. List on Xclaim: Submit your claim to the Xclaim marketplace. Institutional buyers will submit offers reflecting their valuation.
2. Review the offers: Multiple offers show you the current market price. Compare them to your own expectations.
3. Research the case: Read bankruptcy court filings and plan documents to estimate recovery yourself.
4. Consult an attorney: For large claims, consider consulting a bankruptcy lawyer for a recovery opinion.

The offers you receive from Xclaim buyers are data. They represent what institutional investors think your claim is worth.