Property in a Bankruptcy Estate

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When you file for bankruptcy, the bankruptcy court will create an “estate” as part of its commencement of your case. This estate gives the bankruptcy court temporary legal ownership and rights to most of your property and assets, with a few exceptions.
Property That Is NOT Included in the Bankruptcy Estate

Property that is determined to be exempt from your bankruptcy estate cannot be used by the bankruptcy trustee to pay your creditors. This property will not be subject to the bankruptcy court’s jurisdiction.

Common types of property that will be excluded from the bankruptcy estate include:

  1. Property pledged as collateral for a loan that has already been repossessed by a licensed lender (pawnbroker)
  2. Benefit pensions subject to ERISA by federal law
  3. Social Security payments
  4. Property you possess at the time of filing but that is actually owned by someone else
  5. Property you buy or receive after your filing date (NOTE: inheritance money, proceeds from a life insurance policy, or property received after a divorce settlement can still be included in the estate)
  6. Funds in a Coverdell education savings account or qualified state tuition program (with some stipulations)
  7. Withheld wages and employer contributions that are made toward an employee benefit and/or health insurance plan.

Be aware that the items not included in the bankruptcy estate may not be controlled by the bankruptcy court, but that also means these items cannot be protected during the bankruptcy proceeding with an automatic stay.
Property That IS Included in the Bankruptcy Estate

These items will most likely be considered property of the bankruptcy court as part of your bankruptcy estate…

  1. Property you currently own and possess
  2. Property you currently possess, but still owe money on
  3. Property you currently own, but do not possess at the time of filing
  4. Property and revenue you are entitled to receive
  5. Some types of property that you acquire or become entitled to within 180 days after filing. (see #5 above)
  6. Marital property (depending on your bankruptcy filing status and ownership rights)
  7. The appreciation value of property in your estate
  8. Pre-bankruptcy payments to your “preferred” creditors
  9. Property that has been fraudulently transferred during the two-year period prior to filing for bankruptcy.
  10. Revenue generated by other property in the bankruptcy estate.

As you can see, the bankruptcy court will try to include as many sources of revenue and value as possible in your bankruptcy estate. There can be both benefits and drawbacks of having something included in your bankruptcy estate.
Ask an Experienced Bankruptcy Attorney

Please be advised that when it comes to bankruptcy, every person is different and every financial situation will be unique. It is always going to be in your best interest to consult with an experienced bankruptcy attorney before making any final decisions about filing or not filing for bankruptcy.

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