What Goes Into the Bankruptcy Estate?
Upon a filing of a bankruptcy, everything that the debtor has a legal or equitable interest in becomes property of the bankruptcy estate pursuant to 11 U.S.C. § 541. This includes all money in bank accounts, possessory and ownership interests in property, contractual rights, etc. Despite the fact that the bankruptcy estate is not created until the filing of a bankruptcy petition, a trustee can look back to see if there was a fraudulent transfer or a preferential payment to a creditor prior to the bankruptcy filing and recover those assets for the bankruptcy estate.
The Trustee's Avoidance Powers
The trustee's power to recover assets from fraudulent transfers or preferential payments is known as the trustee's avoidance powers. Therefore, individuals or businesses who receive assets transferred to them via preferential payments or fraudulent transfers may be forced to return the assets to the bankruptcy estate.
It is important to note that 11 U.S.C. § 541 (a)(5) provides that "Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date- (A) by bequest, devise, or inheritance; (B) as a result of a property settlement agreement with the debtor's spouse, or of an interlocutory or final divorce decree; or (C) as a beneficiary of a life insurance policy or of a death benefit plan."
Contact a New Jersey Bankruptcy Lawyer
Therefore, prior to filing a bankruptcy it is important to evaluate whether you expect money of this nature to come into your estate. While you may think that you can simply dismiss the case if this occurs, the trustee may view the bankruptcy as an asset case and refuse dismissal.
If bankruptcy is something that you are considering, contact one of our New Jersey Bankruptcy Lawyers so that you are aware of all the implications that bankruptcy entails and can be guided accordingly.