There are complex bankruptcy laws surrounding inheritance.
If you receive an inheritance or expect one, you should work closely with your bankruptcy lawyer to bring your case to its best outcome.
Protecting Inheritances with Exemptions
If you receive your inheritance prior to filing for bankruptcy, you might be able to protect it with bankruptcy exemptions.
Do not try to hide your inheritance! It’s a matter of public record, and both your creditors and the courts will find out about it anyway. You could be charged with fraud if you make the attempt. Bankruptcy fraud is a federal crime.
The 180-Day Rule
If you receive an inheritance more than 180 days after filing a Chapter 7 bankruptcy, then the property isn’t considered part of the bankruptcy estate. You get to keep the property. The idea is that the courts don’t want you filing for bankruptcy in anticipation of getting that money, but if six months passed and then you received an inheritance, the two events probably were not linked.
If you receive an inheritance within 180 days of the bankruptcy filing, the inheritance becomes part of the bankruptcy estate, even if the court has closed your case. Your bankruptcy attorney will have to amend your paperwork and will have to work to protect your inheritance with exemptions, if possible.
Chapter 13 Bankruptcy
You must inform the trustee that you have received an inheritance. Your lawyer may still be able to protect it with exemptions or protect a portion of it. It is possible the trustee will file a new repayment plan that increases the amount of money you pay to your creditors.
You will generally have to pay the full non-exempt amount to your creditors. Nobody loves hearing that, but it is the truth.
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Bankruptcy law strikes a careful balance between the rights of creditors and the needs of borrowers who declare bankruptcy. Any bankruptcy filing incurs certain obligations that must be met.
Give your bankruptcy case its best chance of success. Reach out to our office for a free consultation. We’ll look at your current and anticipated financial situation and help you craft a strategy that will give you a fresh start and a chance at financial freedom in the future.
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