Property of the Bankruptcy Estate

**This article should be considered an incomplete article until further notice. The intent with this article is to establish a general article about property of the bankruptcy to which subsequent articles discussing the different specifics of property of the estate may refer. **

By definition, property of the bankruptcy estate includes: All legal and equitable interests of the Debtor in property as of the commencement of the case. 11 U.S.C. § 541(a)(1). When explaining this definition to a prospective client, I typically start with the paraphrase: Anything you can point to, whether you can see it or not, and say, “that is mine,” or “that should be mine,” or “that will be mine” is property of the bankruptcy estate.

The bankruptcy code broadly defines property of the estate with a few narrow exceptions. For instance one exception to property of the estate, found in § 541(b)(1), is any power the debtor may exercise solely for the benefit of an entity other than the debtor, i.e., a debtor’s fiduciary power under an express trust, or his managerial powers pursuant to his employment.

Whether an interest is property of the estate, at the moment the Petition is filed, is not left to the discretion of the debtor, trustee, or even the court. It is an objective determination based upon whether the asset falls within the definition in § 541(a).

There is often the question of whether a certain asset is property of the bankruptcy estate. While Federal law (i.e., Bankruptcy law) determines whether such asset of the debtor is property of the estate, state law determines whether the asset is property of the debtor.  So if state law recognizes the property being of the debtor, then Federal law will determine whether such property of the debtor is property of the estate.  Conversely, if state law does not recognize an asset as being property of the debtor, then there is no property of the debtor for Federal law to determine as property of the estate.

There is much to be discussed with regards to property of the estate.  And Debtors need to understand what constitutes property of the estate as their ignorance could put their discharge at risk.  When the debtor understands how broad the definition actually is, the debtor is better prepared for his bankruptcy.

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