What assets of the debtor are included in the bankruptcy estate?

The assets of the bankruptcy estate include all legal and equitable interests of the debtor in property at the commencement of the bankruptcy case. A legal interest means any legal right to the exclusive use and enjoyment of the property. An equitable interest includes any rights or claims to the ownership of property based upon principles of fairness. 

So, if a debtor has the ability to make a valid demand or claim for ownership rights in property, that property becomes part of the bankruptcy estate. This may include rights to sue or collect debts from others. Property of the estate also includes property that the debtor acquired within 180 days of filing for bankruptcy if acquired with proceeds or profits from property of the estate. Property excluded from the estate includes any income derived from the services of the debtor performed after the filing for bankruptcy protection, equitable powers that the debtor may exercise for others, educational IRA plans, 529 plans, and certain ERISA qualified retirement plans.

Federal bankruptcy law allows for certain exemptions of property from the estate based upon state law. State statutes regarding what constitutes a property interest of an individual is generally determinative of whether property indeed belongs to the debtor. Certain agreements will attempt to thwart the provisions of the bankruptcy code by limiting the transfer of property to debtors or divest debtors of ownership in property upon the filing of bankruptcy. These agreements are generally ineffective to prevent such property from becoming property of the bankruptcy estate.

Note: An important state statute regarding exempt property from a bankruptcy estate regards the value of a homestead (or real property) exemption.

Next Article: Section 362 Automatic Stay in Bankruptcy Back to: BANKRUPTCY LAW

Exempt Assets of Debtor

Certain assets of the debtor are exempt from inclusion in the bankruptcy estate. That is, these assets (unless securing a specific debt) are not included in the estate against which creditors may submit claims. 

Generally, exempt assets are determined by state law and include a specific value of items, such as home (homestead), furniture, clothing, jewelry, vehicles, certain qualified retirement accounts, insurance benefits, etc. 

Related Topics

• Participants in the bankruptcy process?
• Key concepts behind the bankruptcy process?
• Absolute Priority Rule
• Pari Passu
• What rules govern the bankruptcy process?
• Bankruptcy Abuse Prevention and Consumer Protection Act
• American Bankruptcy Institute Definition
• Authority of the bankruptcy court?
• Authority of the trustee (debtor in possession) in bankruptcy?
• Debtor in Possession
• The bankruptcy estate?
• Bulk Sales Law
• Automatic stay in bankruptcy?
• Claims by creditors of the bankruptcy estate?
• Voluntary and involuntary bankruptcy?