What property will become part of your bankruptcy estate is governed by 11 U.S. Code § 541, commonly referred to as Section 541 of the Bankruptcy Code. When you file for Chapter 7 or Chapter 13 bankruptcy, you’ll disclose all property you own, both real and personal, in the Schedule A/B. This is one of several forms your Houston bankruptcy lawyer will submit in your bankruptcy packet (collection of forms needed to file). Once this is submitted, the bankruptcy trustee will use this information to place any property not protected by bankruptcy exemptions into what is known as your “bankruptcy estate”.
Bankruptcy Estate Calculation
A good equation to help you understand bankruptcy estates is:
BE (Bankruptcy Estate) = TPV (Total Property Value) – E (Exemptions)
Your bankruptcy estate equals the total value of all property minus exemptions. Because of the importance of exemptions when it comes to keeping your property, you definitely want to consult a bankruptcy attorney, before filing, to determine what property will be included in your bankruptcy estate. This consultation will offer peace of mind and the confidence to file for bankruptcy without the fear of selling everything you own.
What Happens to My Bankruptcy Estate?
When you file bankruptcy, in essence, you are creating a bankruptcy estate for a bankruptcy trustee to manage. The bankruptcy trustee charges a nominal fee for this service that is not included in the initial cost of the bankruptcy filing or in bankruptcy attorney fees. In exchange, the bankruptcy trustee will manage the estate but how they do so will depend on which type of bankruptcy you are filing.
Chapter 13 Bankruptcy
In a chapter 13 bankruptcy, the bankruptcy trustee will calculate how much of your bankruptcy estate you can afford to pay back to creditors based on your income. This amount will be spread over three to five years and will require you to make a bi-weekly or monthly payment to the bankruptcy trustee. The trustee, in turn, pays creditors back equally to ensure that the bankruptcy process is fair to all creditors. This equal treatment of creditors is why you should consult your bankruptcy attorney before paying any large bills right before filing for bankruptcy. At the end of the Chapter 13 bankruptcy repayment plan period, any additional, unsecured and non-priority debt will be wiped out in your discharge.
Chapter 7 Bankruptcy
Alternatively, when you file Chapter 7 bankruptcy, the bankruptcy trustee looks at your bankruptcy estate as a way to pay back your creditors as much as possible by liquidating the property. Many times, people filing bankruptcy in California are able to prevent selling any property by having enough exemptions to cover all the property that they own.
Contact a Texas Bankruptcy Attorney
It’s crucial to avoid leaving any property owned off THE Schedule A/B, as this could have dire consequences, including dismissal of your bankruptcy case or even criminal charges. Contacting a Texas bankruptcy lawyer will help you better understand other facets of the bankruptcy process, and ensure that you have access to legal advice about your property, your debts, and how to get a second chance at healthy finances.