Which Assets are Included in the “Bankruptcy Estate”?

What is Included in the "Bankruptcy Estate"?

“Bankruptcy estate”….sounds pretty fancy, doesn’t it?

But what is it?

When a person files bankruptcy, he or she must disclose all of their assets to the bankruptcy court. These assets are said to make up the person’s “bankruptcy estate.”

If these assets exceed certain dollar amounts (called exemptions), then the court will look to the excess value as a source of funds to pay back the bankruptcy filer’s creditors.

The bankruptcy estate includes all property to which the bankruptcy filer has any legal or equitable claim.

What Does “Legal or Equitable Claim” Mean?

A person can have a “legal or equitable claim” to an asset even if the asset is technically titled in someone else’s name.

Here is a good example:

Sometimes people who are afraid of bank levies from creditors will start depositing their paychecks in a bank account under someone else’s name.

But, these amounts must still be disclosed as assets in a bankruptcy, even though the bank account is not in the name of the bankruptcy filer.

In fact, this sort of arrangement can create a messy situation when a person files bankruptcy.

This is because you want to avoid the appearance of giving “gifts” before you file bankruptcy. That’s a bit beyond the subject of this post, but something to keep in mind.

“Assets” Include Intangible Rights and Rights to Receive Payment

Assets include things like equity in vehicles and homes. That’s easy enough to understand.

But assets also include less tangible things.

Assets include legal claims you might have against a person or a business; the right to receive compensation, commissions, or even unemployment payments; royalties and residuals for artists; and tax refunds owed to the person filing bankruptcy.

Does Anyone Owe You Money? It’s an Asset!

Your bankruptcy estate even includes the five dollars that kid borrowed from you in fifth grade but never repaid.

That last example is funny, but it also makes a good point: let your bankruptcy attorney know about anyone who owes you money.

Many of my clients end up filing bankruptcy because they have been helping their friends and family for years. They have been shouldering the burden for everyone else.


The bankruptcy estate even includes inheritances if you became entitled to the inheritance within six months of your bankruptcy case filing date.

Don’t Give it Away, Now!

Before you start doing “asset planning,” keep in mind the bankruptcy code also gives the bankruptcy trustee in your case the right to recover property or payments that were either (1) improperly transferred away before filing bankruptcy or (2) paid to a creditor in an honest attempt to pay back debts, but the payment resulted in the the creditor receiving “preferential” treatment.

Don’t Lose that Tax Refund

Identifying and protecting the bankruptcy filer’s assets is one of the most important parts of bankruptcy preparation.

I’ve seen many bankruptcy filers over the years lose their nice, big tax refunds because they didn’t realize the refund would be considered an “asset” in their bankruptcy.

There are many other assets that don’t look like assets at first glance. Previously garnished or levied funds are another example. A bankruptcy filer might be able to get some of these funds back, but only if they are properly listed and exempted in the bankruptcy.

Proper bankruptcy planning can sometimes more than pay for the case itself.

Give us a call at (805) 284-0760 for a free bankruptcy consultation.