If you receive an inheritance after you filed for bankruptcy, you’re probably wondering how much, if any, you’re entitled to keep. The answer depends on many factors, such as when you inherited the property, whether the inheritance qualifies for exemptions, and which bankruptcy chapter you filed. Receiving an inheritance during bankruptcy is a little unusual, but as long as you work with an experienced bankruptcy attorney you should not see a major interruption to your case.
Call our Cleveland bankruptcy attorneys at Luftman, Heck & Associates today at (216) 586-6600 to find out more.
The 180 Day Rule
The bankruptcy court adheres to an “180 Day Rule.” If you received an inheritance within 180 days of filing for bankruptcy, it’s likely that the court will take at least some of the inheritance, if not all. If you inherit more than 180 days after you’ve filed, you may get to keep everything, depending on the chapter you’ve filed.
The date used in the 180 Day Rule is the date the decedent passed away. It doesn’t matter if you receive the inheritance two days after or two years later, the court will only look at the date of death.
Is My Inheritance Exempt Under Chapter 7?
When you file for Chapter 7 bankruptcy, your trustee liquidates some of your assets and uses the funds to pay off debts. Some of your debts will get discharged and the rest will be paid off, leaving you essentially debt-free after.
Not all of your assets get liquidated. The bankruptcy court allows a certain number of Exemptions, in amounts they have determined, so you can keep some of your property. These exemptions apply to items like your home and your car, but unfortunately, they don’t automatically apply to your inheritance. Whether you’ve inherited money, property, or personal items, your inheritance could become part of your bankruptcy estate if you’ve inherited it within 180 days of filing. If some or all of what you inherited can be considered exempt, you will likely get to keep it.
Does My Inheritance Go To My Creditors Under Chapter 13?
In a Chapter 13 bankruptcy, the court works with you to set up an affordable repayment plan, so you can keep your assets and have them paid off three to five years after you filed. What you pay is dependent, in part, upon the value of your nonexempt property. If your inheritance is nonexempt it will be added to your other nonexempt property, which could increase its value. Your trustee may decide to file a new repayment plan, which would increase the amount you pay to creditors.
Full Disclosure Is Required
It can be disappointing to learn that you’ve inherited something from a loved one, only to have the court take it away. While you may be understandably upset, it’s important to remember that you must be completely honest and disclose all debts and assets to the court. Your trustee will examine your documents carefully and will question any inaccuracies. If the court finds that you tried to hide an inheritance, you can be hit with monetary penalties or have your case thrown out. Your trustee may even decide to turn your case over to the FBI and have you charged with fraud, which can lead to hefty fines or jail time.
Contact a Cleveland Bankruptcy Attorney
If you’ve received an inheritance during bankruptcy, the first thing you should do is call your bankruptcy attorney and disclose all property you’ve inherited. Your attorney can look over your list to determine which items may be exempt and which may be liquidated or added to your nonexempt property. The bankruptcy attorneys at Luftman, Heck & Associates have years of experience handling inheritance cases.