Today’s Bankruptcy Alphabet Term is B for Bankruptcy Estate
photo credit: takomabibelot
When you file for bankruptcy protection, the filing creates something called the “Bankruptcy estate.” The Bankruptcy estate is like your own little universe that holds all of the property rights and interests you may have in any property at the time that you file.
So basically if you own a house when you file for bankruptcy protection, that house becomes part of the bankruptcy estate. The same is true if you own a car, a timeshare, a boat or any other type of property. Even if you don’t own the property outright – your portion of ownership is included in the Bankruptcy estate. For example, lets say you and your two siblings co-own a house in equal amounts. In that case, you own one-third of the home. So your one-third interest would be included in the estate.
After the property becomes part of the Bankruptcy estate in a Chapter 7 one of two things can happen. Either you can 1) exempt some (if not all) of the property or 2) the property will be liquidated and sold to pay the claims of your creditors.
If you can exempt property out of the Bankruptcy estate (a topic that will be discussed more when we get to letter “E”) that means you can protect it from being sold off to raise money for your creditors. There are a number of different types of exemptions that apply to different categories of property. If your car is part of your Bankruptcy estate, and you want to keep that car, then you will need to use the exemption provision that is appropriate for automobiles.
If you can’t exempt your property then the bankruptcy Trustee (a name you’ll get to know when we get to letter “T”) will be able to sell your property and use the proceeds to pay towards your creditor’s claims and to administer your case.
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