Keeping Stock Options in Bankruptcy Depends on This Key Factor
Are Unvested Stock Options subject to a Chapter 7 Bankruptcy liquidation? Ninth Circuit case law clarifies.
Unvested stock options aren’t very common, but if someone gets compensated with contingent stocks, they can be worth a lot of money. Keeping the unvested stock options in a Chapter 7 bankruptcy liquidation, then, becomes critical.
Stock Options and Property of the Estate
Stocks and the Bankruptcy Code: Section 541
The first place to start is determining whether stocks or stock options are property of the estate. Looking at 11 USC 541(a)(1), we see that “Except as provided in subsections (b) and (c)(2) of this section, all legal or equitable interests of the debtor in property as of the commencement of the case.”