Legal Definitions - after-acquired property

After-acquired property, sometimes called "future-acquired property," refers to assets that a person or business obtains after they have already entered into a legal agreement. This concept is most commonly applied in three distinct legal areas:

• Secured Transactions (Loans): In the context of loans, after-acquired property often serves as additional collateral. This means that if you take out a loan and agree to use certain assets as security, any new assets of a similar type that you acquire later can also automatically become part of that security, even without a new agreement. This helps lenders feel more secure about their loans, especially for businesses that regularly acquire new assets.
  • Example: A trucking company secures a loan to purchase new vehicles by pledging all its current and future trucks as collateral. A year later, the company expands its fleet by buying five brand-new semi-trailer trucks.

    Explanation: These five newly purchased semi-trailer trucks are "after-acquired property." Because of the clause in the original loan agreement, they automatically become additional collateral for the existing loan, even though they didn't exist when the loan was first taken out. If the company defaults on the loan, the lender could potentially claim these new trucks along with the older ones.

• Bankruptcy: When an individual or business files for bankruptcy, there's a specific date (the filing date) that largely determines which assets are included in the "bankruptcy estate" to pay creditors. Generally, most property acquired after this filing date is considered after-acquired property and is protected from being claimed by creditors for debts that existed before the bankruptcy filing.
  • Example: David files for personal bankruptcy. Three months *after* his bankruptcy case officially begins, he wins a significant amount of money in a lottery.

    Explanation: This lottery winning is "after-acquired property" in the bankruptcy context. Since he received it after his bankruptcy case commenced, it is generally not considered part of his bankruptcy estate and cannot be used by his creditors to pay off the debts he had before filing for bankruptcy.

• Wills and Estates: In the context of wills, after-acquired property refers to any assets a person obtains after they have written their will. Unless the will specifically states otherwise, these newly acquired assets will typically be distributed according to the will's general provisions or by law if not specifically addressed.
  • Example: Ms. Chen drafts a will leaving her current home and a specific investment portfolio to her niece. Five years later, she sells her original home, purchases a vacation condo, and inherits a valuable collection of antique furniture from a relative. She never updates her will.

    Explanation: The vacation condo and the antique furniture collection are "after-acquired property." Even though they weren't mentioned in her original will because they didn't exist or weren't owned by her at the time, they would still be distributed according to the general terms of her will (e.g., as part of her overall estate left to her niece) or by intestacy laws if the will doesn't cover residual property.