A. The Concept of Property in Bankruptcy Law

• Author: Roderick J. Wood
• Profession: Faculty of Law. University of Alberta
• Pages: 79-81

Page 79

The concept of property is central to bankruptcy law. In order to understand its use, one must know something about the meaning of this concept in the wider context of the general law. Most often, the concept is employed to distinguish between two fundamentally different kinds of rights - personal rights and proprietary tights. A personal right (also referred to a right in personam) is one that is enforceable against an identifiable person or a definite class of persons. When a creditor lends money to a debtor, the creditor obtains a personal right against the debtor to recover the debt. The right is enforceable only against the person who incurred the obligation. A proprietary right (also referred to as a right in rem) is a right in respect of a thing. The right is available against an indefinite class of persons.¹However, the concept of property is also sometimes used in a wider, less technical sense to denote all valuable rights without regard to whether they are personal rights or proprietary rights.

Page 80

Bankruptcy law uses the wider meaning of property in one context and the narrower meaning in another. One must be careful when using the term in order to understand which sense is intended. The wider meaning is used in identifying which of the debtor’s assets will be available to satisfy the claims of the creditors. The Act defines property in a very broad manner that sweeps both personal rights and property rights into the bankrupt estate. For example, a personal right held by the bankrupt to recover a debt from another vests in the trustee, who thereby obtains the right to commence an action to recover the debt. In this respect, the definition of property is not drawing a distinction between personal rights and property rights but rather is using the term in the broad sense as including all the assets of the bankrupt. This does not pick up absolutely every right held by the bankrupt. A right of action to recover damages in tort for pain and suffering does not vest in the trustee. Nevertheless, most economically significant rights will be caught by the definition.

The narrower concept of property is used to differentiate between claims against the bankrupt that are administered within the bankruptcy regime and claims against the bankrupt that remain enforceable outside it. It is here that the distinction between a personal right and a property right is of fundamental importance. A person who has a personal right against...