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 New York, 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 is comprised of all the debtor's legal or equitable interests in property at the time the bankruptcy case is filed. The estate serves as a temporary legal owner of the debtor's assets and includes not only property directly owned by the debtor but also property in which the debtor has an interest, even if it is held by someone else. The purpose of the estate is to ensure that the debtor's assets are managed and liquidated if necessary to pay off creditors. In the process of distributing the assets, certain property may be exempt from liquidation under New York's exemption laws, which are designed to allow the debtor to retain a basic level of assets post-bankruptcy, such as a primary residence, personal property, and tools of the trade. Creditors are generally paid from the nonexempt assets of the estate, following the priority rules established by the Bankruptcy Code.