What is the Bankruptcy Estate?

A bankruptcy estate usually includes all the assets (tangible and intangible) at the time of filing for bankruptcy. In many states, the community assets of the debtor as well as their spouse also become part of the bankruptcy estate. Assets such as goodwill, intellectual property rights, stock options, tax refunds, and other intangibles also form part of the bankruptcy estate apart from tangibles such as real estate, cars, art work, and so on.

Legal assets such as the right to case filing are also vested with the bankruptcy trustee under the bankruptcy law. Such rights come under the bankruptcy estate.

Administration

All these assets are then administered by the bankruptcy trustee under the jurisdiction of the bankruptcy court. Such assets are usually for sell by the trustee to pay off the creditors.

Normally, a debtor cannot think of transferring assets that come under bankruptcy estate.

Exemptions

There are some asset classes that cannot be included in the bankruptcy estate. These include your 401K account and certain retirement accounts. These statutory exemptions vary from state to state. Only the assets of the bankruptcy estate are within reach of the trustee and the creditors. The exempt property cannot be touched by them.

All property claimed as exempt by the debtor are an estate’s property until this claim is finalized. This usually takes 30 days from the date of the 341 meeting.

When bankruptcy proceedings are started, the debtor should emphasize on disclosing all their bankruptcy schedule assets. The exempt assets need not be disclosed in this schedule. The exempted property can be used by the debtor to make a fresh start after the bankruptcy proceedings are concluded.

Abandoned Property

Some times trustees abandon a property because it is not financially viable to liquidate it. For instance, if the tax on the sale of an asset is higher than the asset’s sale value, it will be abandoned by the trustee. Such property is also no longer considered in the bankruptcy estate. Also, any property that the trustee does not sell at the end of the case is deemed to have been abandoned.

To sum up, in most cases, only the retirement benefits are untouched by the trustee of the bankruptcy. The bankruptcy trustee administers the bankruptcy estate, that is, sells off the assets of the estate to pay off the creditors. The debtor is expected to make a fresh start with the help of the exempt property once the proceedings of the bankruptcy are completed.

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