A bankruptcy estate is automatically created once a debtor files for bankruptcy. This bankruptcy estate includes income, assets, and all the debtor’s properties when filing for bankruptcy. Exemptions from the estate include educational trusts and most pensions. However, bankruptcy law determines which asset or property owned by the debtor will be included in the bankruptcy estate. All through the period of the case, a legal right to control the properties in a debtor’s bankruptcy estate is granted to the bankruptcy trustee.
Assets that make up a bankruptcy estate
When filing for a Chapter 13 or Chapter 7 bankruptcy, debtors (whether married couples or individuals) are expected to list all their assets in the bankruptcy forms. These assets include everything owned by the debtor or their interest registered in household electronics, cars, real property, cash, jewelry, clothing, furnishings, bank accounts, etc. However, a debtor should know that even though all their properties make up a bankruptcy estate, not all the properties are at risk because bankruptcy law gives room for protection of specific properties. Below are assets that make up a bankruptcy estate:
- Properties currently in the debtor’s possession
- Debtor’s share of marital properties
- Properties yet to be received but are entitled to
- Returns from owned properties, such as profits, rental income, etc.
- Properties in someone else’s possession, such as loaned items
- Assets receivable within six months post-filing, such as lottery returns, and inheritance
- Properties have recently been given away
Filing for bankruptcy does not automatically mean that a debtor loses all their properties. They may exempt a few assets, such as assets needed to maintain a household or a job. However, choosing which assets to protect is not up to the debtor – it is decided by the State’s exemption rules when filing for bankruptcy. A debtor needs to know the value of their bankruptcy estate and the extent to which bankruptcy exemptions cover their assets. Once you are familiar with these exemptions, you should lay claim to those exemptions in protecting your assets; otherwise, the bankruptcy trustee has the right to sell the properties and pay-out creditors.
If you would like more information about what you can keep in bankruptcy, contact a Houston bankruptcy attorney.