A guide that describes what is included in your estate when you file bankruptcy. What can the Trustee administer? What is exempt?
What is your Estate?
At the time that you file your bankruptcy, your estate is all of your property and property rights that the bankruptcy court has the right to "administer." If it is exempt as we will discuss next then it is not added into the value of your estate and the bankruptcy trustee cannot touch it. Think of the date you file as a picture of your finances, everything you own on that day needs to be reviewed. If an asset qualifies for one of the exemptions you claim in Schedule C of your petition, if not, you add it to your total amount of assets. In Chapter 13 bankruptcy, all property and income you acquire during your case (which lasts from three to five years) is part of the bankruptcy estate. ASSETS Here is a list of some of the property that is considered part of your estate and that need to be listed in Schedule B of your schedules: Tip: Use Fair Market Value; what someone would pay you for these items in the condition it is at the time you file the petition. Example: you purchased a couch 5 years ago it costs you $1200, you look on craigslist and find a similar couch for $300, that's the amount you put and also print that in the event, the trustee wants to know where you got that number.
Assets that are included.
Property you own and possess when you file: This one is easy; if it's yours and you have it, it's part of your bankruptcy estate, even if you owe money on it. Properties you possess but belong to someone else (like your moms couch) are not part of the estate. Some examples, real estate, cars, cemetery lots, timeshares, guns, personal property, stocks, bonds etc. 2. Property you own but don't possess when you file: Even if you don't actually have the item that you own, it's still in your bankruptcy estate. For example, a security deposit held by your landlord or a utility company, or property that you've loaned to someone. 3. Property you are entitled to receive: If you have the legal right to property but have not yet received it, it's still in your bankruptcy estate. Examples include wages, commissions, tax refunds, vacation pay, an inheritance, insurance policy proceeds from an event that has occurred already, and accounts receivable. For example, February is when you are entitled to receive a tax refund for the prior year but you don't have it then it is part of your estate. Tip: Get your tax refund before you file. 4. Community property. If you live in a community property state, here are the rules: If you're married and file jointly for bankruptcy, all community property and separate property is part of the bankruptcy estate. If you file alone, then all community property and just your separate property (not your spouse's separate property) is part of the bankruptcy estate. Florida is not a community property state so if you live in a community property estate I suggest you ask local counsel about this. 5. Marital property in common law property states: If you live in a common law property state, here are the rules: If you are married and filing jointly, your bankruptcy estate includes all the property you and your spouse own together and separately. If you are filing alone, your bankruptcy estate includes: your separate property and half of the property that is jointly owned by you and your spouse, unless you own the property as tenants by the entirety. Again, seek advice from an attorney in your district. 6. Some types of property that you acquire within 180 days after filing for bankruptcy: If you acquire or become entitled to the following items within 180 days after you file for bankruptcy, the property becomes part of your bankruptcy estate: * an inheritance * property you receive or have a right to receive from a marital settlement agreement or divorce decree, and * death benefits or life insurance policy proceeds. 7. Revenue generated by other property in your bankruptcy estate: This includes earnings produced by contracts that were in effect when you filed for bankruptcy. For example, if you wrote a book before you filed for bankruptcy, any royalties you collect afterwards are part of your bankruptcy estate. 8. Property that appreciates in value after you file: The appreciation is part of your bankruptcy estate. 9. Property that you fraudulently transferred prior to your bankruptcy: If you sold property during the two-year period prior to your bankruptcy for substantially less property worth, or if you gift valuable property during this period, the transfer maybe "fraudulent" and considered part of your bankruptcy estate, and you can be sued by the trustee to get the property back. This information has to be disclosed not only in Schedule B but also in the Statement of Financial Affairs. 10. Preference payments: Bankruptcy law does not allow you to "prefer" one creditor over another. If you paid creditors more than a certain dollar amount before your bankruptcy filing. The time period differs depending on the type of creditor, the payments may become part of your bankruptcy estate. This means the trustee can sue your creditor to get the money back. For example, your mom loaned you 5k when you lost your job and you got your tax refund and paid her back a month before filing. The Trustee can go after your mom for the money or they may just let you add the 5k on top of what you are supposed to pay to your unsecured creditors. So essentially you're paying it twice. TIP: The timing of the bankruptcy is everything! If you're not in an emergency situation you need to really evaluate when the best time is. A consultation with a bankruptcy attorney would be extremely helpful to weigh out all your risks.
What is Exempt? Well for one, it depends where you live. Exemptions play a major role in chapters 13 bankruptcy and assist you in keeping certain property. The amounts you are going to pay to unsecured creditors (like credit cards and medical bills) are dependent on the amount of property you can exempt; this is called the Chapter 7 Liquidation Test. In other words, this amount is what unsecured creditors would get had you filed a Chapter 7 and liquidated all your assets. This may be the difference between getting knocked out of the chapter 13 and having a confirmable plan. Thus, in chapter 13, exemptions assist in keeping your plan payments low through the reduction of the amount you are needed to pay to your creditors. Tip: This does not mean you do not list the exempted assets. You list all your assets and then claim them in Schedule C Bankruptcy, and I cannot stress this enough because bankruptcy is about full disclosure. Where do you find these wonderful exemptions and which ones apply to you? There are Federal Exemptions but it depends on the state you live whether you are able to use them and every state has its own exemptions. If you live in one of the following states, you can choose to use the federal bankruptcy exemptions; if not, then you are limited to your state's exemptions. These states include Alaska, Arkansas, Connecticut, District of Columbia, Hawaii, Kentucky, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin. The current Federal Exemptions are: 1. Homestead Exemption: protects the equity in your principal place of residence. You can currently protect $22,975 of equity in your home under the federal exemptions. 2. Personal property includes all property you have other than real estate: The following are some of the most common federal personal property exemptions: a. $3,675 for your motor vehicle b. $1,550 for jewelry c. $12,250 aggregate value ($575 per individual item) on household goods, furnishings and appliances, clothes, books, animals, crops, or musical instruments d. $2,300 for tools of trade including implements and books. e. Health aids. f. Life insurance policies that have not matured except credit life insurance, and $12,250 in loan value of life insurance policy. 3. Exemptions Relating to Support or Benefits: a. Domestic maintenance such as alimony or child support reasonably necessary for your support. b. Life insurance payments that you need for support under policy of someone you were a dependent of. c. Social security, unemployment benefits and compensation, veteran's benefits, public assistance, and disability or illness benefits. 4. Exemptions on Recovery Received Due to Injury: a. $22,975 for personal injury except pain and suffering or pecuniary loss. b. award for loss of future earnings needed for support. c. recovery for wrongful death of person you were a dependent of needed for support, and d. Compensation received for being a crime victim. 5. Wildcard Exemption: you can apply the federal wildcard exemption to any property you own. Currently you are allowed $1,225 plus $11,500 of any unused portion of your homestead exemption to exempt any type of property. 6. Retirement accounts that are exempt from taxation, which usually include most genuine non-fraudulent retirement accounts, are fully exempt. However there is a cap of $1,245,475 on IRAs and Roth IRAs.
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