21 Feb What Is “Property” in Bankruptcy
The word evokes visions of acres of green rolling hills, stately houses, lovely fences.
In bankruptcy, however, the word has a much broader meaning.
It means “everything you own” including claims to stuff you might not really own.
It means the stuff that has little or no value. It includes the things you’d have to pay someone to haul away. It extends to things pledged as collateral or swamped by tax liens. It covers heirlooms and exemptions.
Bankruptcy paperwork requires the person filing bankruptcy to list all of their “property.”
Most honest debtors have little trouble with listing houses, cars, and household goods. The tangible stuff is relatively easy.
Property also includes bank accounts, investment accounts, IRA’s, and insurance policies, things with less of a tangible nature, but still things we deal with every day.
What even the diligent debtor sometimes forgets are legal rights: the right to a tax refund; the right to sue for injury; a fixed right to a portion of a probate estate. Lawyers call these things choses in action.
Even if you don’t know what it’s worth today, the fact that you have a legal claim to it makes it property in the eyes of bankruptcy law.
Think beyond tangible
Since the debtor’s bankruptcy estate includes all legal and equitable interests, it is essential to think beyond the tangible assets when doing the schedules. Failure to do so can have unpleasant consequences.
The court can refuse to permit an exemption in assets that are left off the schedules.
More frequently, a debtor who tries to litigate an unscheduled legal right after the bankruptcy may find that he loses the case because, in the bankruptcy, he failed to list the claim in question.
So whatever it is, it belongs on the bankruptcy paperwork.
The moral is: list itor lose it.
Image courtesy of Geograph UK.
Cathy Moran, Esq.
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