What is The Bankruptcy Estate

Bankruptcy Estate

The term “bankruptcy estate” describes the collection of property rights that can be administered by the court in a bankruptcy case. The estate is created at the start of the case and it generally consists of all interests of the debtor in any kind of property as of that time. It includes interests in community property, and other property which cannot be attached under state law, such as the right to receive various kinds of income in the future. Moreover, property comes into the bankruptcy estate free from restrictions conditioned on insolvency or the filing of a bankruptcy case.

The estate also includes property recovered by the trustee, proceeds or rents of property already in the estate, prepetition causes of action or claims possessed by debtor, interests in insurance policies, and various other
interests set forth in 11 U.S.C. §541. Generally, except when the trustee brings property into the estate
through the use of an avoiding power, the estate’s interest in such property is no greater than the debtor’s interest at the time of the filing of the bankruptcy petition. And, in addition to the debtor’s interest in property, if only one spouse in a community property jurisdiction files a petition, the estate may sometimes include the other spouse’s share of all community property.

Although most property acquired by the debtor after commencement of the case does not come into the estate, there are exceptions for certain types of property acquired within 180 days of filing. These exceptions include property acquired by bequest or inheritance, through a spousal property settlement or divorce decree, or as a beneficiary of life insurance. The 180 days runs from the date the original bankruptcy petition is filed, even if a case is converted from one chapter to another. Also, in a chapter 13 case, all property and earnings acquired during the pendency of the case (unless the case is converted to another chapter) are property of the estate.

Even very limited and remote property interests are included in the debtor’s bankruptcy estate. For example, bare
legal title to property, as a trustee or as a convenience co-tenant, brings an interest in that property into the estate. Property of the debtor in the hands of a creditor after repossession also comes into the estate, subject to the creditor’s lien. Similarly, a mere possessory interest without legal title is sufficient to bring property into the estate. Such property may not be available for actual administration by the trustee however, as the estate’s interest is usually limited to the debtor’s interest. The nature of that interest is generally determined under state law. If the debtor has no right under state law to transfer the property, the trustee usually does not have that right either.

Significant issues may arise when two or more people jointly own property and only one of the co-owners files a bankruptcy case. Although the debtor’s partial interest in the property clearly comes into the estate, the Code mandates some protection of the interests of the non-debtor co-owner.

Counsel must exercise care in identifying and listing a debtor’s various interests in property. Failure to properly list property of the estate in the debtor’s schedules may be grounds to deny or revoke the debtor’s discharge. And may give rise to claims by creditors or the trustee against the unlisted property.

Most consumer debtors will find that they can exempt all or almost all property of their estate. Even property which cannot be exempted is often of little interest to the trustee, because of the cost of liquidation, including payment of liens and taxes, and is therefore abandoned or sold back to the debtor.

How We Can Help

Regardless, if you are considering bankruptcy, you should speak with an attorney who has the experience to provide you with the best possible outcome in your case. Contact any of our 5 offices throughout the Miami Valley. (Dayton, Springfield, Xenia, Troy, and Piqua)

Call Chris Wesner Law Office, LLC at 1 (937) 339-8001 or Toll Free at (855) 339-8001 Today.

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