§ 46.1 — What Is Property of the Chapter 13 Estate?

Revised: April 28, 2004

[1]

“Property of the estate” is a phrase of art that is fundamental to almost everything that happens in Chapter 13 practice. It is beyond the scope of this book to comprehensively discuss the subject, but there are aspects to property of the estate that are unique to Chapter 13 cases that deserve some attention.

[2]

The extent of property of the estate becomes important in many litigated issues in Chapter 13 cases. Property of the estate defines the extent of several aspects of the automatic stay.1 The power of a Chapter 13 debtor to use, sell and lease property during a Chapter 13 case is bounded by the definition of property of the estate.2 The exemptions available to a Chapter 13 debtor can only be claimed from the Chapter 13 estate.3 The power of a Chapter 13 debtor to recover and use property that was repossessed before the petition turns on differing notions of property of the Chapter 13 estate.4 Alimony, maintenance and support collection after the filing of a Chapter 13 petition is affected by what is and isn’t property of the Chapter 13 estate.5 The power of a Chapter 13 debtor to cure defaults and maintain payments on a home mortgage depends on what property interest remains in the debtor at the petition.6 Several of the tests for confirmation, including the best-interests-of-creditors test in § 1325(a)(4), can only be calculated based on precise determination of property of the Chapter 13 estate.7 Property of the estate determines whether insurance proceeds can be used by the debtor after a covered loss during a Chapter 13 case.8 The power of the debtor to assume, assign or reject leases or executory contracts turns on whether the leases or contracts became property of the Chapter 13 estate.9 Pawned or pledged property either is or is not drawn into the control of a Chapter 13 debtor depending on the definition of property of the estate one adopts.10 Who gets what at conversion or dismissal of a Chapter 13 case is fundamentally dependent on defining property of the estate.11

[3]

The statutory definition of property of the estate is intentionally broad in all bankruptcy cases; it is even broader in a Chapter 13 case than in cases under other chapters of the Code. Section 541(a) states that the commencement of a bankruptcy case “creates an estate . . . comprised of all the following property, wherever located and by whomever held.”12 That estate includes “all legal or equitable interests of the debtor in property as of the commencement of the case.”13 All interests of the debtor and of the debtor’s spouse in community property are property of the Chapter 13 estate.14 Any interest that the trustee recovers under § 550—including property recovered as preferences (§ 547), as fraudulent conveyances (§ 548) or through exercise of the strong-arm powers (§ 544)—are property of the Chapter 13 estate.15 Under § 541(a)(5), the Chapter 13 estate includes any inheritance, property settlement or life insurance benefit acquired by the debtor within 180 days after the petition.16 Any proceeds, rents or profits from property of the estate are property of the estate.17 And “any interest in property that the estate acquires after the commencement of the case” is property of the Chapter 13 estate.18

[4]

As if § 541(a) was not broad enough, in a Chapter 13 case there is more to property of the estate than under any other chapter of the Code. 11 U.S.C. § 1306 includes in the Chapter 13 estate

(a)  . . . in addition to the property specified in section 541 of this title
(1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first; and
(2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first.19

It is hard to imagine a more inclusive statutory definition than the combination of §§ 541 and 1306 of the Code.

[5]

The statutory exceptions to property of the estate are few and of relatively little importance in Chapter 13 practice.20 The exception to property of the estate for a lease of nonresidential real property terminated before the petition is sometimes at issue in Chapter 13 cases.21 The so-called “spendthrift trust” limit on property of the estate in § 541(c) has some impact in Chapter 13 practice because of ERISA-qualified benefits payable to Chapter 13 debtors.22 The restriction in § 541(d) that the estate includes only the debtor’s interest in property is sometimes important in a Chapter 13 case when a debtor’s equitable interest, for example, in mortgaged property, was foreclosed before the petition.23


 

1  See §§ 68.1 [ Usual Protections ] § 58.1  Usual Protections and 68.2 [ Additional Protection for Postpetition Property and Income ] § 58.3  Additional Protection for Postpetition Property and Income.

 

2  See § 44.1 [ Debtor Has Exclusive Control of Estate Property ] § 45.1  Debtor Has Exclusive Possession and Control of Estate Property.

 

3  See § 49.1 [ Available and Important in Chapter 13 Cases ] § 48.1  Available and Important in Chapter 13 Cases.

 

4  See §§ 46.2 [ Prepetition Repossession, Levy, Sale or Conveyance ] § 46.4  Prepetition Repossession, Levy, Sale or Conveyance and 52.1 [ Turnover of Property ] § 50.1  Turnover of Property.

 

5  See § 69.1 [ Alimony and Support Exception ] § 58.5  Alimony and Support Exception.

 

6  See § 130.1 [ Prepetition Defaults ] § 82.1  Prepetition Defaults—When is Property “Sold” at Foreclosure?.

 

7  See § 160.1 [ In General: Plan Payments vs. Hypothetical Liquidation ] § 90.1  In General: Plan Payments vs. Hypothetical Liquidation.

 

8  See §§ 47.6 [ Insurance Policies and Proceeds ] § 46.10  Insurance Policies and Proceeds and 238.1 [ Loss, Destruction or Surrender of Property after Confirmation ] § 122.3  Loss, Destruction or Surrender of Property after Confirmation.

 

9  See § 172.1 [ Debtor Can Assume, Assign or Reject Executory Contracts ] § 102.1  Debtor Can Assume, Assign or Reject Executory Contracts.

 

10  See § 117.1 [ Pawn Transactions ] § 78.7  Pawn Transactions.

 

11  See §§ 315.1 [ In Cases Filed before October 22, 1994 ] § 143.1  In Cases Filed before October 22, 1994, 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2  In Cases Filed after October 22, 1994 and 338.1 [ In General ] § 153.1  In General.

 

12  11 U.S.C. § 541(a).

 

13  11 U.S.C. § 541(a)(1).

 

14  11 U.S.C. § 541(a)(2).

 

15  11 U.S.C. § 541(a)(3).

 

16  11 U.S.C. § 541(a)(5).

 

17  11 U.S.C. § 541(a)(6).

 

18  11 U.S.C. § 541(a)(7).

 

19  11 U.S.C. § 1306(a).

 

20  See 11 U.S.C. § 541(b).

 

21  See § 174.1 [ Nonresidential Lease of Real Property ] § 102.4  Nonresidential Lease of Real Property.

 

22  See §§ 9.4 [ Pensions ] § 12.4  Retirement Income, 164.1 [ Projected (Disposable) Income ] § 91.2  Projected (Disposable) Income and 248.1 [ Order to Debtor’s Employer ] § 125.1  Order to Debtor’s Employer.

 

23  See § 46.2 [ Prepetition Repossession, Levy, Sale or Conveyance ] § 46.4  Prepetition Repossession, Levy, Sale or Conveyance.