Category Archives: Meeting of Creditors

A big challenge for me, and I suspect for all lawyers, is to be cautious when using “our language” with unsuspecting clients.  At every consultation I am careful to define things like “automatic stay” and “discharge”.  Still, there are some terms I will throw around without thinking twice.  Recently I noticed a client’s quizzical look and realized I was using my bankruptcy language without giving her the benefit of a proper definition.  The term I used was “estate”.  The question my client didn’t want to ask was “what are you talking about?”

While most people are familiar with the term estate, even in a legal setting, many do not understand what it means in bankruptcy.  In reality the term should not be that unfamiliar given that the estate in bankruptcy is very similar to an estate when someone dies.  In every case when a business or individual files a bankruptcy case (be it Chapter 7, 11, 12 or 13), an estate is created.  The estate consists of everything that the bankruptcy debtor (i.e., the business or individual who filed a voluntary case) owns at the time the case was filed (and in certain limited instances, the property the debtor gains an interest in up to 6 months after filing the petition).  This is, of course, quite similar to the “estate” created when someone dies.

The person appointed to administer the estate is called a Trustee.  Part of the Trustee’s job is to determine which assets you own are either excluded or exempt from the bankruptcy estate — based on the claims of exemption (and exclusion) provided by you or your attorney.  If there are items, or parts of the value of items, that are not exempt or excluded from the bankruptcy estate, the Trustee will have assets at her disposal.

In a Chapter 7 case the Trustee will try to liquidate those items in order to raise cash to benefit unsecured creditors.  In a Chapter 13 (or Chapter 12) case, the Trustee will verify that the payment plan you have proposed includes at least the amount that would be available for liquidation in a Chapter 7 case for your unsecured creditors.

Many people believe they own “nothing”, but that is almost never the case.  While it is true that the vast majority of Chapter 7 cases are deemed to be “no asset” cases, that does not mean that the debtor owns nothing at all.  It simply means that the debtor and the debtor’s attorney were able to find exemptions for all of the assets that the debtor does own, thus leaving the estate with no assets that could be liquidated for unsecured creditors.

Because everyone owns something it is vitally important that potential debtors in any bankruptcy case work with an experienced bankruptcy attorney before filing a bankruptcy petition.  To schedule a free consultation call the Law Offices of James Wingfield at 508-797-0200 or visit the contact page of our website today.