Property of Bankruptcy Estate
Free Initial Phone Consultations
Chapter 7 starting at $999, plus filing fees and costs.
Chapter 13 starting at $2,500, plus filing fees and costs.
What is Bankruptcy Estate?
A bankruptcy estate is all property of the debtor that comes under the bankruptcy trustee’s control during duration of the bankruptcy case. Bankruptcy estate is created when the debtor files a bankruptcy petition, and it is protected by the automatic stay against creditors. The bankruptcy trustee is the administrator of the estate. In Chapter 7, the trustee takes possession of the property of the estate. In Chapter 13, the debtor retains possession.
What is the significance of the property of the bankruptcy estate?
What is in the property of the bankruptcy estate determines what creditors receive in distribution. In a Chapter 7 liquidation case, the bankruptcy trustee collects property of the state, takes possession of it, converts that property to cash and then distributes the net proceeds to creditors. In a Chapter 13 re-organization case, the debtor typically keeps the property, yet the size of the estate establishes how much unsecured creditors get paid, i.e., creditors must get at least what they would have received in Chapter 7 liquidation. See Chapter 13 Plan Requirements.
What property is the property of the bankruptcy estate?
The scope of the property of the estate depends on whether the debtor files under Chapter 7 or Chapter 13. Initially, in both chapters, the bankruptcy estate includes all the debtor’s property at the time of filing of the bankruptcy petition, including exempt property (the debtor must claim appropriate exemptions to take the property out of the estate).
The debtor’s property includes all legal or equitable interests, no matter where they are located and no matter who has possession and/or control of them. The interests can be tangible (physical form) or intangible (non-physical form, such intellectual property, rights to sue for damages, easements, permits, licenses, etc.)
In addition, certain property acquired after the bankruptcy filing also becomes property of the estate:
In Chapter 13, all the debtor’s earnings and property acquired during the pendency of the bankruptcy case become property of the estate. In Chapter 7, such post-petition earnings and property are excluded from the estate.
Is there any property that is not the property of the bankruptcy estate?
Although what is included in the bankruptcy estate property is very broad, there are a few exceptions. For example, any powers that the debtor may exercise solely for the benefit of another entity or debtor, any interests of the debtor as a lessee under a lease of non-residential property after the expiration of the lease term, debtor’s eligibility to participate in higher education programs or any accreditation or licensure status as an educational institution, the debtor’s funds used to purchase certain tuition benefits, debtor’s interests in property held by pawnbrokers, debtor’s interest in amounts withheld from wages or contributed by the debtor to certain employee benefit or deferred compensation plans, etc.
How is the property of the bankruptcy estate distributed to creditors?
The Bankruptcy Code governs the distribution of the property of the estate. Under the bankruptcy distribution scheme, secured creditors are paid first from the collateral securing their debt. The remaining assets in the estate are then distributed to unsecured creditors pro rata, subject to priority rules. The priority unsecured creditors must be paid in full before any distribution is made to non-priority unsecured claims.
There are 10 classes of priority creditors, and each class must be paid in full before the next lower class is paid anything. Thus, if there are not enough assets in the estate to satisfy a particular priority class in full, all creditors in that class will share on a pro rata basis. For example, claims for domestic support (alimony, child support) receive first priority, i.e., they must be paid first before any other unsecured creditors receive any distribution. For more information, see How Do Creditors Get Paid in Bankruptcy?
The debtor is only paid if all other classes of claims have been paid in full. Accordingly, the debtor’s primary concern in a chapter 7 case is to retain exempt property and to receive a discharge that covers as many debts as possible. See more information, see Florida Exemptions.
How can we help?
We can help you maximize your bankruptcy success by exempting as much as your property as possible to ensure you retain most, if not all, of your property while discharging most, if not all, of your debts.
At Anna Handy Law Firm, P.A., we are acutely aware of the financial strain of our clients. We do not charge you for the initial phone consultation. We do not push you to file bankruptcy to get a retainer. We don’t judge – we find solutions. We give you honest advice about your options and rights, including the “doing nothing” approach. As such, we offer very affordable bankruptcy fees. We make our fees competitive and in certain cases, we offer payment plans to address each case individually as each case has a different set of circumstances.
If you are overburdened by your debts, being sued or harassed by creditors, or subject to wage garnishment, do not hesitate to call us now for a free initial phone consultation. The attorney’s direct business cell phone number is (386) 248-3000. You may also email us at [email protected].