180 Day After Acquired Property Rule and the Bankruptcy Estate

21 Jun 180 Day After Acquired Property Rule and the Bankruptcy Estate

District of Massachusetts Bankruptcy Judge Rosenthal in the recent case of In re O’Leary, 2007 WL 1746388 (Bkrtcy.D.Mass. 2007) addressed the 180 after-acquired property rule. The rule, found in 11 U.S.C. s. 541(a)(5), says that under some circumstances property acquired by a debtor within 180 of filing a bankruptcy petition becomes property of the bankruptcy estate.

One of such circumstances is a “property settlement agreement with the debtor’s spouse, or of an interlocutory or final divorce decree”. In O’Leary, the trustee had sued to get the debtor’s interest in marital property after he sued for divorce within 180 days of filing bankruptcy.

The Court noted that the question of whether a debtor has a property interest is ordinarily answered by reference to state law. However, in this case, the Court needed only the statutory text, which it read narrowly, because as it stated the “Chapter 7 Trustee [did] not contend that a settlement agreement, a divorce nisi, or a final divorce decree was entered within 180 days of the filing of the petition.”

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