What is Included in a Personal “Bankruptcy Estate”?

Have you been considering a bankruptcy filing and come across the terminology of the “bankruptcy estate”? If you have never filed for bankruptcy or discussed the details with a friend or family member who has, much of the specific language used in the United States Bankruptcy Code and bankruptcy cases can feel quite foreign. One of those terms is the “bankruptcy estate.” What is this, how is it formed, and how will the term apply to your bankruptcy filing in South Florida? Our West Palm Beach bankruptcy lawyers can explain in more detail.

Defining the “Bankruptcy Estate”

The United States Bankruptcy Court for the Middle District of Florida explains that, once you file your bankruptcy petition, “the commencement of your bankruptcy case creates an estate.” That “estate,” then, or the bankruptcy estate, temporarily owns all of the assets of the debtor and “consists of all legal or equitable interests of the debtor in property as of the date the case is filed, including property owned or held by another person if the debtor has an interest in property.” When a trustee is appointed in an individual bankruptcy case, or when the business becomes the “debtor in possession,” the trustee or debtor-in-possession has a duty to make decisions about the property that comprises the bankruptcy estate. In a liquidation bankruptcy, creditors are repaid from the bankruptcy estate.

When a debtor files for Chapter 7 bankruptcy, their assets at the time of filing make up the bankruptcy estate. In a Chapter 13 reorganization case, or in another type of reorganization bankruptcy such as a Chapter 11 case, any property that the debtor receives during the course of the reorganization repayment plan terms will also become property of the bankruptcy estate. The same is true of income earned during the yearslong repayment plan term — income will also become part of the bankruptcy estate.

Exemptions and the Bankruptcy Estate

As soon as you file for bankruptcy, your property becomes part of the bankruptcy estate, as we discussed above. However, you may know that there are “exemptions” under Florida law that will be applicable to your case and that can allow you to “exempt” certain assets. Do the relevant exemptions mean that certain assets are exempt from being included in the bankruptcy estate?

In general, the answer is yes. Once your exemptions are finalized by the bankruptcy court, especially in a personal bankruptcy case under Chapter 7, your exempt property will not be part of the bankruptcy estate from which creditors can be repaid.

Contact Our West Palm Beach Bankruptcy Attorneys Today for Questions of Eligibility and Help with Your Personal Bankruptcy Filing

When you are just beginning to consider the possibility of a personal bankruptcy filing, you will encounter a wide range of bankruptcy terms that may not resonate with you, or anyone else unfamiliar with US bankruptcy law and its contexts. While it will be important to understand what will become part of the “bankruptcy estate” in your case, as well as the exemptions that will be applicable to your case, an experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan Delaney & Eller, PLLC can assist you with all of the complexities associated with filing for a liquidation or reorganization bankruptcy. And if your business is considering a reorganization bankruptcy and seeking information about the bankruptcy estate in a Chapter 11 or Subchapter V case, our firm is also here to assist you with those inquiries. Contact us today for help with your South Florida bankruptcy.

Sources:

flmb.uscourts.gov/faqs/#One

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222.html