What Is a Post-Petition Account?

Financial hardship

Knowing the difference between a pre-petition account and a post-petition account could keep creditors' hands off your future earnings. In the context of a Chapter 7 bankruptcy filing, "a debtor's assets will either be sold or liquidated by the bankruptcy trustee in order to pay as many creditors as possible," according to the Virginia Community Association Network. The best way to prevent paying creditors money they are not entitled to is to know the facts of filing a bankruptcy petition.

Breathing Room

Breathe easier after filing a bankruptcy petition.

According to Finance Guide 101, the most common type of bankruptcy petition filed is the Chapter 7 bankruptcy petition. You file for Chapter 7 for breathing room--once you file the bankruptcy petition, an automatic stay goes into place, meaning all creditors must end their efforts to collect their debts from you, the debtor, your property or property of the estate.

Trustee's Role

Trustee collects your assets.

Once you have filed your bankruptcy petition, the court will appoint a trustee to your case. The trustee represents the interests of your creditors and must dissolve and liquidate all assets that are not exempt under your state's laws. In essence, the trustee sells your assets, and uses the proceeds to pay off your creditors. Afterward, the court will likely cancel the remainder of your debts via discharge, as occurs in "more than 99 percent" of all Chapter 7 cases, according to the U.S. Courts website.

Pre-Petition Accounts

Trustee takes over pre-petition accounts.

Any assets or accounts you owned before filing your bankruptcy petition are pre-petition assets or accounts. Once you file the petition, all these assets, with the exception of exempt property or property abandoned by the trustee, become property of the bankruptcy estate. If your paycheck is issued after filing the petition, but you earned the pay before filing the petition, that pay is a pre-petition asset. The trustee uses all of these assets to pay your creditors.

Post-Petition Accounts

Trustee cannot touch post-petition accounts.

Any assets you acquire after filing the bankruptcy petition fall under post-petition assets. For example, if you file a bankruptcy petition in April, win the lottery in May and deposit the winnings into a bank account, that would be a post-petition account. The trustee cannot go after any post-petition account to pay off your creditors in a Chapter 7 bankruptcy case. That account will remain in your possession.

Chapter 13 Exception

In Chapter 13, post-petition accounts can finance payment plan.

As opposed to Chapter 7 bankruptcy where assets are sold and debts can be discharged, under Chapter 13 bankruptcy, a person with regular income can elect to keep his assets and pay all his debts in a three- to five-year repayment plan. Again, imagine that you filed a Chapter 13 bankruptcy petition in April and won the lottery in May, depositing the winnings into a bank account. That would be a post-petition account; you can use that new account to contribute to your repayment plan, but are not required to do so, reports the U.S. Courts website.

References

• Finance Guide 101: 7 Steps to a Fresh Start After Bankruptcy
• FindLaw: Officers and Administration
• U.S. Courts: Chapter 7
• U.S. Courts: Chapter 13
• Virginia Community Association Network: Bankruptcy -- The Hard Facts

Resources

• Moran Law Group: Bankruptcy in Brief