Commencement of a bankruptcy case creates an estate. The estate technically becomes the temporary legal owner of all the debtor's property. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor's creditors are paid from nonexempt property of the estate.

In California, as in other states, the commencement of a bankruptcy case results in the creation of a bankruptcy estate, which is a central concept in bankruptcy proceedings. This estate becomes the temporary legal owner of the debtor's assets and includes all legal or equitable interests of the debtor in property at the time the bankruptcy case is filed. The estate not only encompasses property that the debtor has in their possession or title but also property that others hold if the debtor has an interest in it. The purpose of the estate is to gather the debtor's assets to allow for the orderly distribution to creditors. Creditors are generally paid from the nonexempt assets within the estate. California has its own set of exemptions, which are specific types of property or equity in property that the debtor is allowed to keep out of the reach of creditors. These exemptions are outlined in the California Code of Civil Procedure and can differ from federal bankruptcy exemptions. Debtors in California can choose between the state exemption system and the federal system, but they cannot mix and match exemptions from both systems.