NEITHER ‘TWIXT NOR ‘TWEEN: Emerging Property Interests in Bankruptcy

A core policy underlying the federal bankruptcy system is to draw a hard line between the debtor’s pre- and postfiling lives. This serves both to further the debtor’s fresh start and assure a final accounting and settlement of all prepetition claims against the debtor. For this reason, a consensus has developed in the decisional law that the term “claim,” for purposes of determining participation in a bankruptcy case, is defined more expansively than under state-law rubrics. Until recently, most cases have adopted a similarly expansive approach to defining property of the estate in the case of debtor causes of action that evolve over time and, thus, are tied to events occurring both pre- and postfiling. This advances the creditor equality aims of the system by ensuring that claims defined as arising prepetition (and thus subject to discharge) will share in the property interests of the debtor corresponding defined. Recently, however, some courts have begun to analyze property interests that straddle the filing by tying the question to state-law accrual rules. This Article takes the position that those authorities are misguided, misunderstand the division of authority between state and federal law in bankruptcy cases, and have unnecessarily complicated the analysis of assignment of debtor causes of action to the property of the estate. It concludes by urging that characterization of these claims be resolved under a federal framework and with specific attention to the unique aims of the bankruptcy system.