What does nature of debtors interest in property mean on a chapter 7 bankruptcy petition?

Filing all of the forms correctly for bankruptcy can be complicated and confusing; as an example, you may have wondered exactly what does nature of debtor's interest in property mean on the Chapter 7 bankruptcy petition.

A person can have two different types of interest in property, and "nature of debtor's interest" is another way of saying the type of interest you have in a property. The two main types are equitable interest and legal interest in a property.

• You have equitable interest in property when you own it, even if you don't have title to it. An example would be if you were the beneficiary of a trust. You don't have the right to legally control the trust, but you own the funds in the trust that have been allocated to you.
• You have legal interest in property when you have legal title to a piece of property without actually owning it. In the example above, the beneficiary of the trust owns the trust but the trustee who administers it has a legal interest in the trust.

This is an important distinction to understand in bankruptcy and to convey correctly on the forms that you fill out. Perhaps your name is on a joint bank account with your elderly mother's, but the money in the account is clearly her life savings. If you can prove that your interest in the account is a legal interest the account can be exempt from the bankruptcy.

The attorney that you use to help you file your bankruptcy can help make sure you are declaring the correct type on interest in a property. There are other types of interest you could have in property, including a future interest, which is when you receive an inheritance shortly after the bankruptcy. The amount you inherit becomes part of your bankruptcy estate.

Bankruptcy planning requires the help of an attorney to ensure you are taking the appropriate steps to exempt all of the property that you are entitled to and none that you are not entiled to. Your attorney can make sure your rights and assets are protected to the fullest extent allowed by law.