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Estate Or Property Of A Debtor
LAWDOG is intended to assist in the understanding of basic concepts. See Disclaimer. Always obtain legal advice from legal professionals.
All Legal Or Equitable Interests of Debtor In Property
Property Recovered By Trustee
Post-Petition Earnings of Individual Debtor Generally Excluded
"Bankruptcy Filing"or "Ipso Facto" Clauses Not Enforced
All Legal Or Equitable Interests of Debtor In Property
The commencement of a voluntary, joint, or involuntary bankruptcy petition automatically creates an "estate". Such estate is comprised of all the property, described in Section 541 of the Bankruptcy Code, wherever located and by whomever held. This includes all legal or equitable interests of the debtor in the property at the commencement of the case. This is, of course, a very broad category, which may include the interest of the debtor in everything from bank deposits to personal injury actions. Section 541 (b) also has some exclusions. See Section 541 (b) reproduced here for illustration purposes only.
Community Property
The Bankruptcy Estate also includes all interests of the debtor and spouse in community property that is under the sole, equal, or joint management and control of the debtor, and is liable for an allowable claim against the debtor as of the commencement of the case. See Section 541 (a)(2) reproduced here for illustration purposes only.
Certain Property Acquired By Debtor After Filing
The Bankruptcy Estate also may include any interest in property that the debtor acquires or becomes entitled to acquire within 180 days after such date by inheritance, or as a result of a divorce, or as a beneficiary of a life insurance policy. See Section 541 (a)(5) reproduced here for illustration purposes only.
Also included in the Bankruptcy Estate is any interest in property that the trustee recovers under applicable Bankruptcy law. Illustrations may include a recovery where the trustee has avoided a fraudulent or preferential transfer of property of the debtor. See Preferences from previous menu. Also included are any interests in property preserved for the benefit of or ordered transferred to the estate by the court or under applicable Bankruptcy law. See Section 541 (a)(3) reproduced here for illustration purposes only.
Post-Petition Earnings of Individual Debtor Generally Excluded
Proceeds, product, offspring, rents, or profits of or from property of the estate are also included in the Bankruptcy Estate. However, earnings from services performed by an individual debtor after the commencement of the case are generally not included in the Bankruptcy Estate. See Section 541 (a)(6) reproduced here for illustration purposes only. Note that under Chapters 12 and 13, certain future earnings may be included in the estate as part of a plan in those Chapters.
"Bankruptcy Filing" or "Ipso Facto" Clauses Not Enforced
An interest of the debtor becomes property of the estate under the rules in this section, regardless of any provision in an agreement, transfer instrument, or applicable nonbankruptcy law that restricts or conditions transfer of such interest by the debtor. Clauses in contracts which cause a forfeiture, modification, or termination of the debtor's interest in property, conditioned on the insolvency or financial condition of the debtor, on the filing of a bankruptcy by the debtor, or on the appointment of or taking possession by a trustee in a bankruptcy case or a custodian before the filing, generally do not affect property of the Bankruptcy Estate. See Section 541 (c) (1) (A) reproduced here for illustration purposes only.
Spendthrift Trust May Be Excluded
A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable under Section 541 (c) (2). Therefore, certain "spendthrift trusts" under state law may be excluded from the Bankruptcy Estate. See Section 541 (c) (2) reproduced here for illustration purposes only.
