Did you know there are provisions within the Bankruptcy Code which allow your trustee to claim certain assets of yours even after you’ve filed for bankruptcy? This can mean that an inheritance, a tax refund, vacation pay, or anything else of value can be claimed by your trustee as part of your “bankruptcy estate” and used to repay your creditors. All of this is made possible by Section 552 of the Bankruptcy Code which allows trustees to acquire certain of your personal assets or income because they become “after acquired interest”, or simply that they were a dormant part of your financial estate which later generated a profit.
When you file for Chapter 7 most of your estate (personal property) is generally considered to be exempt because you are petitioning to have some or all of your debts discharged by the courts. This means that any assets you acquire after filing for Chapter 7 cannot be claimed by your trustee to repay your debts. It’s very rare for anyone filing for Chapter 7 to have a trustee pursue them for assets considered to be after acquired interest. Just make sure to get professional legal advice, based on your asset portfolio, before choosing which type of bankruptcy filing you pursue.
A Chapter 13 filing does allow for property or income acquired during your petition to be considered after acquired interest because they are part of your bankruptcy estate. You also need to consider that your repayment schedule will take between 3 and 5 years to complete, allowing your trustee plenty of time to use any previously undiscovered assets or income to repay your creditors. So, if after 2 years you were suddenly informed of a substantial inheritance, this could quite easily be claimed by the bankruptcy trustee appointed by the court. There is a legal obligation on your part to make the trustee aware of any such current or future assets. Any failure on your part to inform the trustee of such assets or income will be viewed in an unfavorable light by the courts.
Timing is very important when filing your bankruptcy petition, and this is doubly true if you expect to have a future financial windfall. Stock options are a great example of this, simply because you may currently own a certain amount of stock but not be allowed to vest that stock for several years. If you had filed for a Chapter 7 bankruptcy in New Jersey it’s highly unlikely that any profit you make from vesting that stock in several years would be considered as an after acquired interest asset. In the case of a Chapter 13 filing you would need to make your trustee aware of any profit you generate from vesting that stock if it takes place within the timeframe of your repayment plan, but also make them fully aware that you have those stocks in the first place.
Please consult an experienced bankruptcy attorney if you feel unsure as to whether or not some of your personal assets could be considered as after acquired interest or not.