The commencement of a voluntary, joint, or involuntary bankruptcy petition automatically creates an "estate." The estate is comprised of all the property that is described in Section 541 of the Bankruptcy Code. It includes all legal or equitable interests of the debtor in property, wherever located, as of the commencement of the case. To determine a debtor's rights in property, a court examines state law.
What is Included in an Estate
In addition to the obvious and tangible assets of the debtor, property of the estate also includes the following:
* the right to file a lawsuit;
* stock options;
* the right to inheritances received within six months after the bankruptcy is filed;
* tax refunds for pre-petition years, intellectual property and tax attributes such as loss carryforwards;
* 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;
* certain after-acquired property that the debtor acquires or becomes entitled to acquire within 180 days after such date by inheritance, as a result of a divorce or as a beneficiary of a life insurance policy;
* any interest in property that the trustee recovers under applicable bankruptcy law; and
* proceeds, product, offspring, rents, or profits of or from property of the estate.
What is Excluded from an Estate
If an asset is not property of the estate, the debtor does not have to claim it as exempt to protect it from creditor claims: it is, by definition, beyond the reach of creditors and the trustee. The following items generally may be excluded as property of the estate:
* post-petition earnings of the individual debtor;
* debtor's rights in spendthrift trusts; and
* debtor's rights in ERISA qualified retirement plans and 401(k) plans.
Copyright 2005 LexisNexis, a division of Reed Elsevier Inc.