May, 2014
Kansas Bankruptcy News
A monthly publication for the non-bankruptcy attorney prepared by the Law Office of
Donald C. Astle, Donald C. Astle and Sheila Maksimowicz Attorneys at Law.
345 Riverview Suite 730,Wichita, KS
Property of the Bankruptcy Estate

Estate? Huh? Someone die? No. 11USC541(a) of the Bankruptcy Code creates a “bankruptcy estate” which consists of all the property of the debtor that will be under the jurisdiction of the bankruptcy court. The purpose of establishing this estate is to protect the debtor’s property from levy and execution by creditors. It is central to giving the debtor a fresh start and for an orderly distribution of non-exempt assets (tax refund, sale of the debtor’s boat) to creditors. Section 541(a) of the Bankruptcy Code, defines property of the bankruptcy estate as very broad an all inclusive. However, the Bankruptcy Code in Section 541(b) specifically lists property that is not property of the estate. Kind of like exempt property, but not quite the same. Exempt property varies somewhat from state to state. However, Section 541(b) does not. If some of the debtor’s property is covered under 541(b) the bankruptcy court, in a sense, has no say so in the debtor retaining that property. See “Statute of the Month” for an abbreviated text of the parts applicable to consumer bankruptcies. Some of the more common items in a consumer bankruptcy that are not property of the estate include: 541(b)(1)…power that the debtor may exercise solely for the benefit of an entity other than the debtor. So, you can be conservator of grandma’s estate when she’s incapacitated in the nursing home. 541(b)(3)…any eligibility of the debtor  to participate in programs authorized by the Higher Education Act of 1965…So, you can still get that student loan, grant, or other benefit for college. 541(b)(5)&(6)…funds placed in an education retirement account…and funds used to purchase tuition credits…a qualified state tuition program (529 and Cloverdell type accounts). Some restrictions apply to these programs. So, the money saved for the college education won’t be taken to pay creditors. 541(b)(7)…any amount…from the wages of an employee for payment as contribution to (ii) a deferred compensation plan (e.g. “457 deferred comp plan”) and (iii) a tax-deferred annuity under IRS code 403(b). These are generally ERISA qualified retirement plans and are probably the most important exception to the all inclusive definition of property of the estate. What’s nice about property that is excluded from the bankruptcy estate is that it is universal and does not depend on state law or state interpretations, and is, by definition, beyond the reach of both creditors and the bankruptcy trustee. Finally, with exempt property, like the homestead, the debtor must wait until the objection period of the exemption has expired (generally 30 days after the first meeting of creditors) before disposing of exempt property. With property that is not even property of the estate there is no waiting. So, if you file a week before that college tuition payment is due you can pay it from that educational IRA.

(b) Property of the estate does not include—
(1) any power that the debtor may exercise solely for the benefit of an entity other than the debtor;
(3) any eligibility of the debtor to participate in programs authorized under the Higher Education Act of 1965
(5) funds placed in an education individual retirement
(6) funds used to purchase a tuition credit or certificate or contributed to an account in accordance with section 529(b)(1)(A) of the Internal Revenue Code of 1986 under a qualified State tuition program (as defined in section 529(b)(1)…
(7) any amount—
(A) withheld by an employer from the wages of employees for payment as contributions—
(i) to—(I) an employee benefit plan that is subject to title I of the Employee Retirement Income Security Act of 1974 or under an employee benefit plan which is a governmental plan under section 414(d) of the Internal Revenue Code of 1986; (II) a deferred compensation plan under section 457 of the Internal Revenue Code of 1986; or (III) a tax-deferred annuity under section 403(b) of the Internal Revenue Code of 1986…
JP...The Legal Cartoon
Copyright David Carter used with permission.
Filing fee increase effective June 1, 2014
Chapter 7: from $306 to $335
Chapter 13: from $281 to $310
Serving Kansas since 1984, The Law Offices of Donald C. Astle practices exclusively in consumer bankrupcy and collection law. No other cases are accepted.

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Sheila C. Maksimowicz
University of Kansas, 1980
Donald C. Astle
Washburn University, 1984