What does included in bankruptcy mean?

Answer 1

Chapter 5 of Title 11, United States Code, ("the Bankruptcy Code"), defines the bankruptcy estate in its Subchapter III.

(Title 11 of the United States Code, the statutory entirety of the Bankruptcy Code, should not be confused with Chapter 11 of the Bankruptcy Code, which is Title 11, United States Code, section 1101 et seq., pertaining to bankruptcy reorganizations, one type of action that may be pursued under the Bankruptcy Code).

Title 11, United States Code, section 541(a) sets forth that "[t]he commencement of a case...creates an estate...." This is known as the bankruptcy estate.

Title 11, United States Code, section 541(b) is instructive as to exclusions from the bankruptcy estate:

(b)Property of the estate does not include---

(1)any power that the debtor may exercise solely for the benefit of an entity other than the debtor;

(2)any interest of the debtor as a lessee under a lease of nonresidential real property that has terminated at the expiration of the stated term of such lease before the commencement of the case under this title, and ceases to include any interest of the debtor as a lessee under a lease of nonresidential real property that has terminated at the expiration of the stated term of such lease during the case;

(3)any eligibility of the debtor to participate in programs authorized under the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.; 42 U.S.C. 2751 et seq.), or any accreditation status or State licensure of the debtor as an educational institution;

(4)any interest of the debtor in liquid or gaseous hydrocarbons to the extent that---

(A)

(i)the debtor has transferred or has agreed to transfer such interest pursuant to a farmout agreement or any written agreement directly related to a farmout agreement; and

(ii)but for the operation of this paragraph, the estate could include the interest referred to in clause (i) only by virtue of section 365 or 544(a)(3) of this title; or

(B)

(i)the debtor has transferred such interest pursuant to a written conveyance of a production payment to an entity that does not participate in the operation of the property from which such production payment is transferred; and

(ii)but for the operation of this paragraph, the estate could include the interest referred to in clause (i) only by virtue of section 365 or 542 of this title;

(5)funds placed in an education individual retirement account (as defined in section 530(b)(1) of the Internal Revenue Code of 1986) not later than 365 days before the date of the filing of the petition in a case under this title, but---

(A)only if the designated beneficiary of such account was a child, stepchild, grandchild, or stepgrandchild of the debtor for the taxable year for which funds were placed in such account;

(B)only to the extent that such funds---

(i)are not pledged or promised to any entity in connection with any extension of credit; and

(ii)are not excess contributions (as described in section 4973(e) of the Internal Revenue Code of 1986); and

(C)in the case of funds placed in all such accounts having the same designated beneficiary not earlier than 720 days nor later than 365 days before such date, only so much of such funds as does not exceed $5,000;

(6)funds used to purchase a tuition credit or certificate or contributed to an account in accordance with section 529(b)(1)(A) of the Internal Revenue Code of 1986 under a qualified State tuition program (as defined in section 529(b)(1) of such Code) not later than 365 days before the date of the filing of the petition in a case under this title, but---

(A)only if the designated beneficiary of the amounts paid or contributed to such tuition program was a child, stepchild, grandchild, or stepgrandchild of the debtor for the taxable year for which funds were paid or contributed;

(B)with respect to the aggregate amount paid or contributed to such program having the same designated beneficiary, only so much of such amount as does not exceed the total contributions permitted under section 529(b)(6) of such Code with respect to such beneficiary, as adjusted beginning on the date of the filing of the petition in a case under this title by the annual increase or decrease (rounded to the nearest tenth of 1 percent) in the education expenditure category of the Consumer Price Index prepared by the Department of Labor; and

(C)in the case of funds paid or contributed to such program having the same designated beneficiary not earlier than 720 days nor later than 365 days before such date, only so much of such funds as does not exceed $5,000;

(7)any amount---

(A)withheld by an employer from the wages of employees for payment as contributions---

(i)to---

(I)an employee benefit plan that is subject to title I of the Employee Retirement

Income Security Act of 1974 or under an employee benefit plan which is a governmental plan under section 414(d) of the Internal Revenue Code of 1986;

(II)a deferred compensation plan under section 457 of the Internal Revenue Code of 1986; or

(III)a tax-deferred annuity under section 403(b) of the Internal Revenue Code of 1986;

except that such amount under this subparagraph shall not constitute disposable income as defined in section 1325(b)(2); or

(ii)to a health insurance plan regulated by State law whether or not subject to such title; or

(B)received by an employer from employees for payment as contributions---

(i)to---

(I)an employee benefit plan that is subject to title I of the Employee Retirement Income Security Act of 1974 or under an employee benefit plan which is a governmental plan under section 414(d) of the Internal Revenue Code of 1986;

(II)a deferred compensation plan under section 457 of the Internal Revenue Code of 1986; or

(III)a tax-deferred annuity under section 403(b) of the Internal Revenue Code of 1986;

except that such amount under this subparagraph shall not constitute disposable income, as defined in section 1325(b)(2); or

(ii)to a health insurance plan regulated by State law whether or not subject to such title;

(8)subject to subchapter III of chapter 5, any interest of the debtor in property where the debtor pledged or sold tangible personal property (other than securities or written or printed evidences of indebtedness or title) as collateral for a loan or advance of money given by a person licensed under law to make such loans or advances, where---

(A)the tangible personal property is in the possession of the pledgee or transferee;

(B)the debtor has no obligation to repay the money, redeem the collateral, or buy back the property at a stipulated price; and

(C)neither the debtor nor the trustee have exercised any right to redeem provided under the contract or State law, in a timely manner as provided under State law and section 108(b); or

(9)any interest in cash or cash equivalents that constitute proceeds of a sale by the debtor of a money order that is made---

(A)on or after the date that is 14 days prior to the date on which the petition is filed; and

(B)under an agreement with a money order issuer that prohibits the commingling of such proceeds with property of the debtor (notwithstanding that, contrary to the agreement, the proceeds may have been commingled with property of the debtor),

unless the money order issuer had not taken action, prior to the filing of the petition, to require compliance with the prohibition.

Paragraph (4) shall not be construed to exclude from the estate any consideration the debtor retains, receives, or is entitled to receive for transferring an interest in liquid or gaseous hydrocarbons pursuant to a farmout agreement."

The Federal Rules of Bankruptcy Procedure and the common law also are instructive as to inclusions and exclusions in the bankruptcy estate. Your lawyer will know which is which, and thus what and how to specify property in the estate, in your bankruptcy petition.