Cryptocurrency and Digital Assets in Bankruptcy

How does the estate actually capture cryptocurrency?

Filing a bankruptcy petition creates an estate. Under 11 U.S.C. § 541(a)(1), that estate is comprised of all legal or equitable interests of the debtor in property as of the commencement of the case, "wherever located and by whomever held." Those last words matter for digital assets. It does not matter that the coins sit on an offshore exchange, in a hardware wallet in a drawer, or in a self-custody wallet whose keys only you hold. If you have a legal or equitable interest in it on the day you file, it is generally estate property.

The estate also captures "proceeds, product, offspring, rents, or profits" of estate property under § 541(a)(6). Selling a coin does not remove it from the estate; the conversion in form of property of the estate does not change its character as property of the estate. Staking rewards and similar yield on a pre-petition holding raise the same question.

• Self-custody wallets are not outside the estate simply because no third party holds the keys.
• Exchange account balances are an interest in property held by another entity, which § 541(a)(1) reaches.
• Swapping one token for another before filing does not change the character of the property.

What changes the answer for your particular holdings?

Several things move the outcome, and none of them is the type of token. The first is value: a wallet holding a few dollars of a token is a different practical problem from a six-figure position. The second is exemptions. Section 522 lets an individual debtor exempt certain property from the estate, and 11 U.S.C. § 522(a)(2) defines "value" as fair market value as of the date of filing. For a volatile asset, that date matters.

The third is which exemption set applies to you. Under § 522(b)(3)(A), the governing law is generally that of the state where your domicile was located for the 730 days before filing, subject to a further look-back rule. Some states have opted out of the federal list entirely. The fourth is chapter: Chapter 7 and Chapter 13 treat nonexempt property very differently, which is covered below.

What does federal law say about disclosure?

The Bankruptcy Code does not have a crypto section. It has a definition of estate property broad enough not to need one. Section 541(a)(1) reaches all legal or equitable interests, and § 541(c) invalidates restrictions on the transfer of the debtor's property "in order that all of the interests of the debtor in property will become property of the estate."

Court filing packets state the disclosure duty plainly. The Eastern District of Louisiana's Chapter 13 packet warns that if you knowingly and fraudulently conceal assets or make a false oath or statement under penalty of perjury, either orally or in writing, in connection with a bankruptcy case, you may be fined, imprisoned, or both, and that all information supplied is subject to examination by the Attorney General acting through the Office of the U.S. Trustee, the Office of the U.S. Attorney, and other offices of the Department of Justice.

• Schedules are signed under penalty of perjury.
• Section 523(a)(3) makes a debt that is neither listed nor scheduled potentially nondischargeable, which is a separate reason accuracy matters.
• Section 523(a)(2) excepts from discharge debts obtained by false pretenses, false representation, or actual fraud.

Where do state or local rules change the outcome?

Federal law decides what is in the estate. State law often decides what comes back out. Under § 522(b), an individual debtor may exempt property listed in either the federal schedule at § 522(d) or the set available under § 522(b)(3), but § 522(b)(2) allows a state to withhold the federal list. Several states have done exactly that. Alabama, for example, provides by statute that in cases under Title 11 only property exempt under Alabama law and under federal laws other than § 522(d) is exempt (Ala. Code § 6-10-11). Alaska (Alaska Stat. § 09.38.055) and Maine (14 M.R.S. § 4426) each narrow the available exemptions by statute as well.

Most state exemption schedules were written long before digital assets existed, so whether a general personal-property or wildcard exemption reaches a token is a question local practice answers, not one this page can answer for every state. Your state hub page carries the published amounts.

• Some states permit the federal § 522(d) list; others require the state list.
• The 730-day domicile rule in § 522(b)(3)(A) can point to a state you no longer live in.
• Local rules and forms vary by district — check the court that covers your county.

What does this look like in practice?

In a Chapter 7 case, the trustee may sell property of the estate to pay debts, subject to your right to exempt the property or a portion of the sale proceeds. The Southern District of Iowa's official instructions put it in those terms and add that exemptions are not automatic: to exempt property you must list it on Schedule C, and if you do not list it, the trustee may sell it and pay all of the proceeds to your creditors. A sale of estate property outside the ordinary course happens after notice and a hearing under 11 U.S.C. § 363(b)(1).

In practice, a small holding that fits inside an available exemption often stays where it is. A larger nonexempt position is the case where a trustee is most likely to act, and where the volatility of the asset between the filing date and any sale becomes a live issue for everyone involved.

• Chapter 7: nonexempt value may be liquidated for creditors.
• Chapter 13: filers generally propose a plan rather than surrender property.
• Exemptions must be claimed on Schedule C; they do not apply by default.

What documents and information are involved?

Digital assets are disclosed on Official Form 106A/B, Schedule A/B: Property — the same schedule that captures cash, deposits of money, bonds, mutual funds and publicly traded stocks, non-publicly traded stock, retirement accounts, and, at line 35, "any financial assets you did not already list." Line 34 covers other contingent and unliquidated claims of every nature, which is where a claim against a failed exchange may belong. Exemptions are then claimed on Schedule C.

Gather records before you file rather than after. Filing fees are set by statute and the Judicial Conference: the Chapter 7 filing fee is $245 (28 U.S.C. § 1930(a)(1)(A), (f)(1)) plus a $78 administrative fee and a $15 trustee surcharge; the Chapter 13 filing fee is $235 (28 U.S.C. § 1930(a)(1)(B)) plus the same $78 administrative fee.

• Exchange transaction history and year-end statements for every platform you have used.
• Wallet addresses and current balances, including wallets you consider dormant.
• Records of any transfer or sale in the months before filing.
• Purchase records showing what you paid and when.

What should you ask a lawyer?

This is an area where district practice and state exemption law do most of the work, so a local bankruptcy attorney is the right person to answer the specific questions. Useful things to bring to that conversation: a full list of wallets and exchanges, the approximate value of each, and an honest account of any transfers you made in the last year.

Questions worth asking include how the trustees in your district have handled digital assets, whether any exemption in your state has been applied to them, how a volatile valuation is typically handled between filing and administration, and whether a recent transfer or sale creates an issue. If you are weighing chapters, ask how the value of a nonexempt holding would be treated in a Chapter 13 plan compared with a Chapter 7 liquidation.

• "Which exemption set applies to me under the 730-day domicile rule?"
• "How is a volatile asset valued as of the petition date in this district?"
• "Do any transfers I made in the past year create a problem?"
• "How would a nonexempt holding be treated in a Chapter 13 plan here?"

Frequently asked questions

Do I have to report Bitcoin in bankruptcy?

Yes. Section 541(a)(1) makes all legal or equitable interests of the debtor property of the estate, wherever located and by whomever held, and schedules are signed under penalty of perjury. Digital holdings belong on Schedule A/B alongside cash, deposits and securities. Omitting an asset does not remove it from the estate; it creates a separate and serious problem.

Can the trustee take my crypto?

A Chapter 7 trustee may sell property of the estate to pay debts, subject to your right to exempt the property or a portion of the proceeds. Whether that happens turns on the value of the holding and whether an exemption covers it. Exemptions are not automatic — property must be listed on Schedule C to be claimed, and a sale outside the ordinary course requires notice and a hearing under § 363(b)(1).

Are NFTs part of the bankruptcy estate?

The Code does not name NFTs, but § 541(a)(1) reaches all legal or equitable interests of the debtor in property as of the filing date, wherever located and by whomever held. That language is written to be comprehensive rather than to list asset types. An NFT you hold on the petition date is generally disclosed the same way any other financial asset is, on Schedule A/B.

What happens if someone hides crypto in a bankruptcy case?

Court filing packets state it directly: knowingly and fraudulently concealing assets or making a false oath or statement under penalty of perjury in connection with a bankruptcy case can be punished by a fine, imprisonment, or both. All information supplied is subject to examination by the Attorney General acting through the U.S. Trustee, the U.S. Attorney, and other Department of Justice offices.

Does selling crypto before filing keep it out of the estate?

Not in the way people often hope. Section 541(a)(6) brings proceeds, product, offspring, rents or profits of estate property into the estate, and the conversion in form of property of the estate does not change its character as property of the estate. Pre-filing transfers are also a standard area of trustee inquiry. Discuss any recent sale or transfer with a lawyer before you file.

Does a state exemption cover digital assets?

It depends on your state, and often on local practice rather than express statutory text. Section 522(b)(3)(A) generally points to the exemption law of the state where you were domiciled for the 730 days before filing, and some states — Alabama, Alaska and Maine among them — limit filers to their own state schedules by statute. Most of those schedules predate digital assets.

How much does it cost to file?

The Chapter 7 filing fee is $245 (28 U.S.C. § 1930(a)(1)(A), (f)(1)), with a $78 administrative fee and a $15 trustee surcharge. The Chapter 13 filing fee is $235 (28 U.S.C. § 1930(a)(1)(B)) plus the same $78 administrative fee. Section 1930 permits installment payment for an individual commencing a voluntary or joint case; attorney fees are separate.

Sources

• 11 U.S.C. § 541 — Property of the estate · official source
• 11 U.S.C. § 522 — Exemptions · official source
• 11 U.S.C. § 363 — Use, sale, or lease of property · official source
• 11 U.S.C. § 523 — Exceptions to discharge · official source
• Bankr. E.D. La. official guidance — Chapter 13 Form Packet
• Bankr. S.D. Iowa official guidance — Instructions - Bankruptcy Forms for Individuals
• Bankr. M.D. La. filing packet — Ch13_Vol_Petition_ Package-2026.pdf
• U.S. Bankr. Ct. D. Alaska, The Forms Individuals and Married Couples Need to File Bankruptcy
• Ala. Code § 6-10-11
• Alaska Stat. § 09.38.055
• 14 M.R.S. § 4426
• 28 U.S.C. § 1930(a)(1)(A), (f)(1)
• 28 U.S.C. § 1930(a)(1)(B)
• Bankruptcy Court Miscellaneous Fee Schedule, Item 8
• Bankruptcy Court Miscellaneous Fee Schedule, Item 9

Related

• Exemptions: what they protect
• Chapter 7
• Chapter 13
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