When a bankruptcy case is filed, the entire property of the debtor is included in the “bankruptcy estate.” Under Chapters 7 and 11, estates include only property owned by the debtor at the time of filing. All assets you own at the time of the announcement will become part of the bankruptcy estate, except for exempt assets. All property you own when you file for bankruptcy (except most pension and education funds) becomes part of what you call “property” when you file for bankruptcy.
An “inheritance” is created, which includes the debtor’s assets and property rights at the time of bankruptcy. In Chapter 7 and Chapter 13 cases, the property of the bankrupt is under the exclusive control of the court as part of the estate, unless the court removes those assets from the “inheritance” or the court closes the case. In Chapters 12 and 13, an estate also includes property and income you received during bankruptcy proceedings. Almost all assets and income obtained after depositing constitute the debtor’s newly created assets and are not subject to bankruptcy protection.
If a Chapter 13 plan is converted in good faith to Chapter 7, the bankruptcy estate only includes what would have been included in the debtor had originally filed for Chapter 7—property acquired after the filing date becomes part of the debtor’s new beginning property. Other types of property that may be included include shares of debtors in common property, certain wills received within 180 days from the filing date of the application, and any income received or property acquired as a result of the bankruptcy estate. These estates represent all the property and income of the debtor subject to bankruptcy and include all the legal or fair interests of the debtor in the property from the moment the case was initiated – pre-claim property. Under chapters 13 and 12, when a payment plan is approved, the assets and income after application are due to the debtor unless otherwise provided by the plan.
Assets that the debtor chooses to be exempt property also “belong in the estate” until the exemption request is finalized. Even if your assets are part of an estate, some of your assets may be protected in bankruptcy through exceptions, as described below. Conversely, assets that are not part of an estate are not subject to the control of the bankruptcy court, but they are also not protected by bankruptcy proceedings, such as an automatic stay. The bankruptcy court will sell the property that you cannot protect through bankruptcy immunity and distribute the proceeds to your creditors.
Additionally, bankruptcy immunity can be used to protect certain assets from inheritance and creditors. No matter which bankruptcy option you ultimately choose, you need to know what exceptions exist to protect your assets. In most Chapter 7 cases filed in Texas, bankruptcy immunity protects assets so that the debtor cannot lose any property.
For example, Chapter 7 bankruptcy cases are known as “liquidation” bankruptcy because the key role of the trustee is to determine the non-exclusive real estate or assets to be liquidated for the benefit of unsecured creditors. Bankruptcy filings in the United States are governed by one of several chapters of the U.S. Bankruptcy Code, including Chapter 7, which provides for the liquidation of assets; Chapter 11, which involves the reorganization of companies or individuals; and Chapter 13, which provides for the passage of debt relief agreements. Or a specific payment plan to repay the debt.
The Bankruptcy Code gives the trustee the right to recover assets that were wrongfully transferred by the debtor or that were seized by creditors shortly before the filing of bankruptcy proceedings. The Bankruptcy Code governs the distribution of estate property.
Because the debtor usually retains most of its property in rehabilitative bankruptcies, it is only relinquished under chapter 7. The debtor retains property while making chapter 13 payments to a trustee in accordance with the bankruptcy’s repayment schedule. If your property is subject to liens, the succession passes to the property subject to those liens, unless you or the bankruptcy trustee can avoid them.
Inheritance consists of all legitimate or equitable interests in your property from the start of the case, including assets owned or held by another person if the debtor has an interest in the property. Property excluded from the bankruptcy estate includes any income derived from the debtor’s services rendered after filing for bankruptcy protection, equitable powers that the debtor may exercise over others, IRA educational plans, 529 plans, and certain ERISA-compliant retirement plans. As a pre-petition action, that is, before you declare your bankruptcy under Chapter 7, if you cannot file for a bankruptcy waiver that protects your tax refund, your tax refund will become part of the bankruptcy estate, and the bankruptcy trustee will be entitled to your refund. Even though “property” manages your assets, bankruptcy does not mean you will lose your property. In a bankruptcy filing, individual debtors and couples must list all of their property, called assets, on a bankruptcy form, whether it is a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. Assets listed in a bankruptcy filing vary by the individual debtor and by husband and wife. and whether they live in a common law or community state. Debtors have certain obligations when filing for bankruptcy, including submitting a financial statement detailing their assets, liabilities, and any applicable exemptions« Back to Glossary