What Does “Property Of The Estate” Mean?

31 Oct What Does “Property Of The Estate” Mean?

Property of the bankruptcy estate is defined by 11 USC section 541.  It specifically excludes certain assets of a debtor.  Other assets may be property of the estate at first, but later be excluded because they are abandoned by the trustee, redeemed by the debtor, sold, or claimed as “exempt” by the debtor. 

It makes a difference if property is considered to be property of the estate or not.  If it is property of the estate, the Bankruptcy Court has jurisdiction to administer it.  If not, they don’t.  The “Automatic Stay”, which comes from section 362, only applies to property of the estate.  The automatic stay prohibits creditors from taking any action against property of the estate, and can be a very important protection.

Money considered to be a “trust fund”, such as taxes collected for the IRS or state sales tax, is not considered to be property of the estate.  As a result, payments by a debtor to the taxing authority before filing for bankruptcy are not recoverable by the trustee as a preference.

It is a violation of the automatic stay for a creditor to go after, or try to go after property of the estate.  A “willful violation” of the stay is punishable by actual damages and possible punitive damages pursuant to section 362(k).

 If you have filed a bankruptcy case, be sure to let your bankruptcy attorney know if any creditor threatens to go after your property after you have filed.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.

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