Properties that are Not Part of the Bankruptcy Estate

What are the properties that would generally be excluded in a bankruptcy proceeding?

Properties received within 180 days after filing bankruptcy (the consumer must immediately notify the trustee (in a supplemental form) if these situations come up (even if the bankruptcy has been closed):

• Inheritance - as long as it was not from a living trust
• Life insurance payout – proceeds from a life insurance policy or death benefits
• Divorce settlement- property that was the result of a marital settlement agreement or divorce decree

*If the consumer converted from Chapter 7 to Chapter 13, the 180-day period applies to when Chapter 7 was filed, not when Chapter 13 was approved.

Education retirement account or state tuition credit account (if it was paid at least 365 days before the filing date).

Funds designated for child support (although there is a $5,000 limit placed on funds contributed “not earlier than 720 days or later than 365 days” before the filing date.)

Trust funds such as taxes collected for the IRS or state sales tax, also the consumer’s contributions to the taxing authority before filing for bankruptcy.

Any amount withheld on the consumer’s wages by an employer with regards to contributions to ERISA-qualified retirement plans (pensions subject to federal law), deferred compensation plans and tax-deferred annuities (401k), and health insurance plans.

Properties that were pawned before filing bankruptcy. The consumer does not have possession of the property because the lender technically owns it for the time being.

Properties that are in the consumer’s possession but he/she does not own.

If the consumer is entitled to receive properties in the future would those be considered exempt too?

If the consumer is aware that he/she is legally going to be receiving assets (money, properties, anything of value, etc.) at the time he/she filed bankruptcy then those would fall under the bankruptcy estate. They would not be excluded even if “future” means that those assets were not received before the discharge. It is important that the consumer declares these “expected” properties in his/her petition, as “omission” of such vital information would hurt the bankruptcy case even if it has been closed or discharged. The trustee can and will request for the case to be reopened if he/she is convinced that the consumer has cheated.

Read this resources for more information about how property is treated in bankruptcy:

Property in bankruptcy overview

Non exempt property in bankruptcy