Your bankruptcy estate is all of your property and property rights that the bankruptcy court has the right to “administer.” If an item of property is not in your bankruptcy estate, then the bankruptcy trustee cannot touch it.
For the most part, your bankruptcy estate consists of all of the property that you own when you file for bankruptcy. In Chapter 7 bankruptcy, the property you acquire after you file for bankruptcy is not part of your estate (with a few exceptions noted below). In Chapter 13 bankruptcy, all property and income you acquire during your case (which lasts from three to five years) is part of the bankruptcy estate.
The law has also carved out some exceptions so that some property you own when you file is not part of your bankruptcy estate (for example, certain eduction savings accounts). To learn more about property that is not part of your bankruptcy estate, see Property Not in Your Bankruptcy Estate.
Often it’s easy to figure out what property you own and is part of your bankruptcy estate, but not always. Here’s a list of categories of property in your bankruptcy estate.
Property you own and possess when you file. If you own something and it’s in your possession, it’s part of your bankruptcy estate, even if you owe money on it. Property you possess but that belongs to someone else (like your friend’s DVD collection) are not part of the estate.
Property you own but don’t possess when you file. Even if you don’t possess an item of property that you own, it’s still in your bankruptcy estate. Examples of this type of property include security deposits held by your landlord or a utility company, or property that you’ve loaned to someone.
Property you are entitled to receive. If you have the legal right to property but have not yet received it, it’s still in your bankruptcy estate. Examples include wages, commissions, tax refunds, vacation pay, an inheritance, insurance policy proceeds from an event that has occurred already, and accounts receivable.
Community property. If you live in a community property state, here are the rules: If you’re married and file jointly for bankruptcy, all community property and separate property is part of the bankruptcy estate. If you file alone, then all community property and just your separate property (not your spouse’s separate property) is part of the bankruptcy estate. To learn more about community and separate property, see Marriage and Property Ownership: Who Owns What?.
Marital property in common law property states. If you live in a common law property state, here are the rules: If you are married and filing jointly, your bankruptcy estate includes all the property you and your spouse own, together and separately. If you are filing alone, your bankruptcy estate includes:
• your separate property, and
• half of the property that is jointly owned by you and your spouse, unless you own the property as tenants by the entirety.
Some types of property that you acquire within 180 days after filing for bankruptcy. If you acquire or become entitled to the following items within 180 days after you file for bankruptcy, the property becomes part of your bankruptcy estate:
• an inheritance
• property you receive or have a right to receive from a marital settlement agreement or divorce decree, and
• death benefits or life insurance policy proceeds.
Revenue generated by other property in your bankruptcy estate. This would encompass any earnings produced by contracts that were in effect when you filed for bankruptcy. For example, if you wrote a book before you filed for bankruptcy, any royalties you collect afterwards are part of your bankruptcy estate.
Property that appreciates in value after you file. If you own property that appreciates in value after you file for bankruptcy, the appreciation is part of your bankruptcy estate.
Property that you fraudulently transferred prior to your bankruptcy. If you sold property during the two-year period prior to your bankruptcy for substantially less than property is worth, or if you gifted valuable property during this period, the transfer may be “fraudulent” and the property considered part of your bankruptcy estate. The trustee can sue to get the property back.
Preference payments. Bankruptcy law does not allow you to “prefer” one creditor over another. If you paid creditors more than a certain dollar amount before your bankruptcy filing (the time period differs depending on the type of creditor), the payments may become part of your bankruptcy estate. This means the trustee can sue your creditor to get the money back. (To learn more, see Pre-Bankruptcy Payments to Creditors: Can the Trustee Get the Money Back?)