“Right to Receive” Property in Bankruptcy

December 13, 2013

If you have the legal right to property, but have not yet received it, it’s still part of your bankruptcy estate. Examples of “right to receive” property include: wages, commissions, bonuses, tax refunds, vacation pay, an inheritance, insurance policy proceeds from an event that has already occurred, and accounts receivable.

Even if you don’t receive the property or payment until after your bankruptcy case is filed, whether the property is part of the estate depends on when your right to the property becomes vested. If you were entitled to the property before the bankruptcy was filed, it is part of the bankruptcy estate. If it occurred after, then it is not part of the bankruptcy.

Whether you were entitled to receive property at the time you filed your case will depend on particular circumstances. In the case of employment bonuses, the deciding factor is often found in the debtor’s employment contract. Recently, the Eighth Circuit Bankruptcy Appellate Panel found that a debtor did not have an ownership interest in a bonus check because it was provided at the discretion of the employer and she did not have a legal entitlement to it until it was actually paid (which was after her filing date). In re Klein-Swanson, 488 B.R. 628 (8th Cir. B.A.P. March 22, 2013).

In cases when the right to receive property is not discretionary, the entitlement may be contingent. A contingent right must be disclosed in your bankruptcy paperwork even if you have not yet met all performance requirements. Contingent claims can be very convoluted and require the help of an experienced bankruptcy attorney.

If you need bankruptcy relief and are entitled to receive property, seek out the advice of an experienced bankruptcy attorney. In many cases, timing a bankruptcy filing is very important in determining whether the debtor keeps or loses the “right to receive” property. Contact the experienced Fears | Nachawati attorneys for more information and a free consultation by calling our office at 1.866.705.7584 or by sending an email to fears@fnlawfirm.com.

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