In a previous post, I wrote about some simple rules for determining ownership of property. The concept of property is important in both chapter 7 and chapter 13 bankruptcy cases – it affects the administration of chapter 7 cases and the amount paid in monthly chapter 13 plan payments, since the debtor’s property composes what’s called the bankruptcy estate. And in most cases, property ownership is pretty easy to determine. But there are some cases in which who owns property – and how much the property is worth – can get complicated. Here are a few examples:
Property can include assets you don’t yet possess. The bankruptcy code defines property as assets owned by the debtor at the time the bankruptcy case was filed and assets to which the debtor is entitled on the day the case was filed. People considering a bankruptcy case need to be aware of the “to which the debtor is entitled” part in making their decisions. The not-yet-received-but-entitled-to property can take a number of forms. Here are some of the most common:
Unpaid Wages. Employed bankruptcy debtors are almost always owed wages from their employer on the day a bankruptcy case is filed. The amount of wages owed is property of the bankruptcy estate.
Tax Refunds. Bankruptcy debtors who receive income and property tax refunds are owed a certain percentage of their refund on the day they file. The percentage is determined by how much of the year has passed on the day the case is filed. For instance, 50% of the year has passed when a case is filed on July 1st and 75% of the year has passed when a case is filed on October 1st. In these examples, then, 50% of the tax refund is property of the estate for the case filed on July 1st and 75% of the refund is estate property for the case filed on October 1st.
To further complicate things, these not-yet-received property interests might be a non-issue in a bankruptcy case, or it might be critically important to the administration of a case. Talk to one of our knowledgeable attorneys at Kain & Scott to understand the steps needed to protect your property in a bankruptcy case. Reach out to Kain & Scott at www.kainscott.com.
