What Is “Property of the Estate” in a Bankruptcy Case?

 Posted on April 05, 2022 in Bankruptcy

In cases where a person has extensive debts that they may be unable to repay, bankruptcy can be a good option that will provide financial relief, allowing them to receive a fresh start. However, filing for bankruptcy will require a person to take a complete inventory of the assets they own, and they will need to report a variety of financial details. By understanding what is considered “property of the estate,” a person can determine their best options for receiving relief from their debts while maintaining ownership of as much of their assets as possible.

Assets Included in the Bankruptcy Estate

The filing of a bankruptcy petition will create a bankruptcy estate that includes all money or property that will be considered during the bankruptcy process. Depending on the type of bankruptcy a person pursues, non-exempt assets in the bankruptcy estate may be seized by the bankruptcy trustee in their case. In a Chapter 7 bankruptcy, assets may be liquidated, and the proceeds will be used to repay their creditors. While a Chapter 13 bankruptcy usually will not require a person to turn over their assets, they will need to repay creditors an amount equal to the value of the non-exempt assets in the bankruptcy estate.

The U.S. Bankruptcy Code details the types of assets that are considered to be property of the bankruptcy estate. These include all of the physical property a person owns, as well as their financial assets or interests. If a person is married, the community property they own together with their spouse will be considered property of the estate, even if a person is filing for bankruptcy separately from their spouse. Property of the estate also includes:

• Inheritances or life insurance benefits received by a debtor within six months after filing for bankruptcy.

• Proceeds received from the property of the estate, such as rent paid by tenants of property a person owns.

• Tax refunds or credits based on a person’s earnings before filing for bankruptcy, including credits or carryovers for charitable contributions or a business’s net operating losses.

• Property that was improperly transferred to others before filing for bankruptcy, such as preferential payments made to creditors.

Some assets are excluded from the bankruptcy estate, and they will not be considered during the bankruptcy process. These include funds in retirement savings accounts, deferred compensation plans, tax-deferred annuities, and education savings accounts created for the benefit of a child or grandchild, as well as amounts paid toward health insurance plans and the Social Security benefits a person is entitled to receive. If a debtor is the trustee of a trust that is for the benefit of people other than themselves, or if they are the beneficiary of a spendthrift trust, the assets in these trusts will not be considered part of the bankruptcy estate. 

Contact Our San Antonio Bankruptcy Asset Protection Lawyer

By understanding what assets will need to be addressed during the bankruptcy process, you can make sure you will be able to discharge your debts and maintain financial stability. At the Law Offices of Chance M. McGhee, we can advise you on the types of assets you will need to report and the exemptions that will apply to you, and we will make sure you meet all of your legal requirements as you work to complete your bankruptcy. Contact our Kerrville bankruptcy and debt relief attorney today and set up a free consultation by calling 210-342-3400.

Source:

https://www.law.cornell.edu/uscode/text/11/541