A chapter 7 case allows a person a fresh start in New Jersey. The bankruptcy court allows a debtor to keep certain property to commence their fresh start. However if the amount of an asset is substantial, the trustee may require the debtor to sell that specific asset. The only assets that are subject to scrutiny are the assets of the bankruptcy estate.
In general, the assets that are included in a New Jersey bankruptcy estate are all of the debtor’s assets in which he has an interest at the time of the bankruptcy filing. This includes any and all property- including any partial interests. This also includes a present right to an asset or money in the future. An example of a present right to future money is the right to sue someone from an automobile accident injury that occurred prior to the bankruptcy filing. If the accident occurred after the bankruptcy filing, the right to the money, would not be a part of the bankruptcy estate. In this circumstance, the bankruptcy courts look to the date of the accident.
However, the bankruptcy code sets forth a very limited list as when an asset becomes part of the bankruptcy estate, when the debtor’s right to that asset was initially received after the filing. The bankruptcy code’s list is as follows:
1. The debtor’s right to an inheritance that was derived within 180 days after the bankruptcy petition filing. This means that if the debtor has a right to receive an inheritance, from someone who passed away within 180 days after the filing, the inheritance is included in the bankruptcy estate.
2. The debtor’s right to an asset, that is related to the debtor and his (ex) spouse’s property settlement agreement and/or divorce court order, that commenced within 180 days after the bankruptcy petition filing. This means that if within 180 days after the filing, the debtor initially becomes entitled to an asset by way of a divorce or related court order, in connection with the debtor’s spouse or ex spouse, such interest is part of the bankruptcy estate.
3. Proceeds, product, offspring, rents or profits derived from the bankruptcy estate property, not including earnings from the debtor’s services after the filing. This is very atypical and generally applies to proceeds related to real estate in which the trustee has a right to take from the debtor. Again, this is extremely unusual.
4. An interest that the bankruptcy estate acquires. This is also very atypical and generally applies when the trustee purchases another asset with an estate asset that he has the right to take or control.
In the event that an asset is deemed a bankruptcy estate asset does not mean that the trustee can take any portion of the asset. All bankruptcy assets that are exempt may not be taken by the trustee. The explanation as to how exemptions work is located in another part of this site.
Robert Manchel is a bankruptcy lawyer in New Jersey, who may be contacted at 866 503 5655 to discuss your questions.