A bankruptcy case is made up of the debtor’s interest in property and the debtor’s debts. Before the debtor’s bankruptcy case is filed, the debtor provides his or her attorney with information to enable the debtor’s attorney to prepare the debtor’s schedules of property, debt, income and expenses for electronically filing the debtor’s bankruptcy case. (Note: Schedules of co-debtors and executory contracts and leases are filed, too, however, these are not discussed in this article.)
In general, the debtor’s interest in property is defined in the section 541 of the Bankruptcy Code as follows:
(a) The commencement creates an estate. Such estate is comprised of all the following property, wherever located and by whomever held:
(1) Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.
The majority of bankruptcy courts and appellate courts have interpreted this statute broadly; any property interest of the debtor is property of the estate. Even though a debtor’s interest in property becomes property of the estate when the debtor’s bankruptcy case is filed, in Texas, Debtors may choose state exemptions or federal exemptions to “exempt out” their property interest from the estate. Neither the trustee nor a judgment creditor may recover exempt property from the debtor. Property of the estate becomes the debtor’s exempt property 30 days after the debtor’s 341(a) Meeting of Creditors
, unless the Trustee or a creditor files an objection to the Debtor’s exemptions.