When a debtor enters bankruptcy, an “estate” is created for the ultimate benefit of creditors. Under the Bankruptcy Code, the assets of a bankruptcy estate include “all legal or equitable interests of the debtor in property as of the commencement of the case.”[1]� This definition is broad and includes even strictly contingent interests.[2]�
Recently, the U.S. Court of Appeals for the Second Circuit issued a noteworthy decision analyzing whether certain property should be included in the estate of a Long Island hospital that is in bankruptcy. The court’s conclusion in In re Mid-Island Hospital, Inc.[3]� – rejecting the hospital’s contentions that it was entitled to more than $1 million in interest on, or profits earned, by property that had been withheld from the hospital before its bankruptcy filing- suggests that debtors should seek a turnover of assets to their estate under Bankruptcy Code �543 as quickly as possible after entering bankruptcy. In this way, the funds will be bearing interest in an estate account, rather than being held by another party.
