In Peoria, Illinois, just as anywhere else in the country, the bankruptcy estate describes the aggregation of property rights that come under the control of the court in a bankruptcy case. The estate is created upon the commencement of the case and it generally consists of all interests of the debtor in any kind of property as of that time. A basic understanding of the scope of the bankruptcy estate helps prevent misunderstandings related to filing for bankruptcy protection.
What Property of the Debtor is Part of the Bankruptcy Estate?
Almost all property of the debtor becomes part of the bankruptcy estate upon the filing of a bankruptcy petition. The estate includes property recovered by the trustee, proceeds of property already in the estate, pre-petition causes of action possessed by the debtor such as a personal injury claim, and interests in insurance policies. In a chapter 13 case, all property and earnings acquired during the pendency of the case are part of the estate. The estate’s interest in such property is no greater than the debtor’s interest at the time of filing the bankruptcy petition.
Most property acquired by the debtor after the commencement of the case does not come into the estate. Additionally, there are exceptions for specific types of property acquired within 180 days of filing the petition that exclude it from the estate. These exceptions include property acquired by inheritance, spousal property settlements or divorce decrees, or property acquired as a beneficiary of a life estate. The 180 days begins the date the bankruptcy petition is filed.
The Bankruptcy Estate and Jointly Owned Property
When a co-owner of property files for bankruptcy protection, his or her partial interest in the property becomes part of the bankruptcy estate. However, the bankruptcy code provides protection for the other, non-debtor co-owner.
Most debtors, when represented by a competent bankruptcy attorney, can exempt all or almost all of the property of their estate. Most of the time, even if property cannot be exempted, and thus can be taken and sold by the trustee, such property is of little interest to the trustee because of the cost of liquidation, and is therefore abandoned by the trustee.
Bankruptcy or Other Debt Issues in Illinois?
The Kepple Law Group is highly knowledgeable in bankruptcy matters, including the discharge of debts, and can advise clients in all aspects of bankruptcy proceedings.