In every type of bankruptcy case, whether a Chapter 7 case or Chapter 13 case, a separate, distinct legal entity called the “bankruptcy estate” is created by operation of 11 U.S.C. §541 of the bankruptcy code. This “bankruptcy estate” is in fact a separate, legal being from the person filing for bankruptcy relief. When a bankruptcy case is filed, all a filer’s property is thrown into the bankruptcy estate. In other words, when a person files for bankruptcy relief, all of that person’s property actually belongs to the bankruptcy estate. However, the drafters of the bankruptcy code did not want a person to emerge out of the bankruptcy process completely destitute and without any property to reorganize. Therefore, the bankruptcy code provides for various value allotments or value limitations called bankruptcy exemptions that allow a filer to reclaim property back out of the bankruptcy estate and retain it. In most cases, a person’s bankruptcy exemptions will be sufficient to allow one to retain all of one’s property. If you are thinking about filing for bankruptcy in Worthington, MN, Behm Law Group, Ltd. provides legal advice and assistance throughout the process.
Chapter 7 Estate: If you qualify for Chapter 7, the bankruptcy trustee appointed by the bankruptcy court to administer your bankruptcy case will review all of your property in the bankruptcy estate and analyze whether some of the property will not be able to be protected with your bankruptcy exemptions. To the extent that some of the property can’t be protected with your bankruptcy exemptions, that property will be labeled “nonexempt”, and the trustee will be able to sell it and distribute the value to your creditors.
Chapter 13 Estate: Chapter 13 bankruptcy is designed to restructure your debts into a manageable payment plan that lasts three to five years. The bankruptcy trustee, you, and your lawyer will work together to draft a repayment plan that the court will approve. A feasible plan is determined by your types of debts, your exemptions, and the value of the property in your bankruptcy estate.
What Makes Up the Bankruptcy Estate?
The property included in a bankruptcy estate is determined by Section 541 of the bankruptcy code. Although each bankruptcy case and each bankruptcy estate is different, the bankruptcy estate can be comprised of the following:
- Real estate properties
- Motor vehicles and vehicles of trade
- Personal property items (clothing, jewelry, appliances, etc.)
- Financial accounts
- Security deposits
- Properties loaned to another party
- Wages, commissions, tax refunds, and other sources of income to which you are entitled
- Income from rented properties
- Asset value appreciation
- Applicable community property
- Applicable payments made to creditors before filing for bankruptcy
- Property acquired within 180 days of filing for bankruptcy
Because these exact properties can vary from case to case, it may be difficult to determine which assets are exempt from your bankruptcy estate and which will not be exempt.
If you are considering filing for bankruptcy in Worthington, MN, contact Behm Law Group, Ltd. at (507) 387-7200 today to learn more about the different chapters of bankruptcy and how your bankruptcy estate may be determined.