BANKR UPTCY AND INSOLVENC Y LAW84
Bankruptcy law uses the wider meani ng of property in one con-
text and the narrower meaning in another. One must be careful when
using the term in order to underst and which sense is intended. The
wider meaning is used i n identifying which of the debtor’s assets will be
available to satisfy t he claims of the creditors. The Act defines property in
a very broad manner th at sweeps both personal rights and property
rights into the bankrupt estate. For example, a personal r ight held by
the bankrupt to recover a debt from another vests in the trustee, who
thereby obtains the r ight to commence an action to recover the debt.
In this respect, the definition of property is not drawi ng a distinction
between personal rights and property rights but rather is using the
term in the broad sense a s including all the assets of the ban krupt. This
does not pick up absolutely every right held by the bankr upt. A right of
action to recover damages in tort for pain and suf fering does not vest in
the trustee. Nevertheless, most economically significant r ights will be
caught by the definition.
The narrower concept of property is used to differentiate between
claims again st the bankrupt that are administered with in the bank-
ruptcy regime and cla ims against the bankrupt th at remain enforceable
outside it. It is here that the distinct ion between a personal right and
a property right is of fundamental importance. A person who ha s a
personal right again st the bankrupt loses the right to enforce the clai m
upon the occurrence of the bank ruptcy.2 In its place, the claimant ob-
tains the r ight to prove the claim in bankr uptcy and obtain a dividend
from the liquidation of the bankrupt’s assets. The matter is entirely
different if the claimant has a property right in the asset. Only those
assets th at belong to the bankr upt vest in the trustee.3 If t he asset is not
owned by the bankr upt but is the property of the claimant, the claim-
ant will have the r ight to recover the asset from the trustee.
In many instance s, both the bankrupt and t he claimant will h ave
property rights in t he same thing. Consider the case of a bankr upt who
operated a jewelry store and repaired a watch ow ned by a customer.
The bankrupt has a propert y right in the watch in the form of a pos-
sessory lien, whi le the customer remains the owner of the watch. The
right to the lien is a property r ight that vests in the tr ustee, and it can
be asserted by t he trustee against the customer. However, the lien se-
cures only the cost of the repair s and does not give the trustee the right
2 The right is not lost but is mer ely suspended in respect of ce rtain kinds of
claims t hat survive the dis charge of an individual ba nkrupt. See Chapter 10,
3 BIA, s 71.