Property that is not in your bankruptcy estate is not subject to the bankruptcy court’s jurisdiction, which means that the bankruptcy trustee can’t take it to pay your creditors under any circumstances.
The most common types of property that don’t fall within your bankruptcy estate are:
- Social Security payments, whether they be past, present, or future (Section 407 of the Social Security Act)
- property you buy or receive after your filing date (with the few exceptions described above)
- pensions subject to the federal law known as ERISA (commonly, defined benefit pensions)
TIP. Even if they are technically part of your bankruptcy estate, most retirement plans are exempt, which means you’ll get to keep them anyway. For example, IRAs and 401(k) plans are exempt in all states (although the exemption for IRAs is limited to $1,171,650 per person).
- property pledged as collateral for a loan where a licensed lender (pawnbroker) retains possession of the collateral
- property in your possession that belongs to someone else (for instance, property you are storing for someone), and
- wages that are withheld, and employer contributions that are made, for employee benefit and health insurance plans.
Funds placed in a qualified state tuition program or Coverdell education savings account are also not part of your bankruptcy estate, as long as:
- You deposit the funds into the account at least one year before filing for bankruptcy.
- The beneficiary of the account is your child, stepchild, grandchild, step-grandchild, or in some cases, foster child.
This exclusion applies to all funds placed in the account at least two years previous to your filing date. It is limited to funds of $5,475 or less placed in the account within a one-year period beginning two years before you file for bankruptcy.
For a list of categories of property that is part of your bankruptcy estate, see Property in Your Bankruptcy Estate.