Chapter 7 Bankruptcy involves the trustee taking charge of all of your non-exempt assets in order to repay your creditors. A question may, therefore, arise regarding the status of any inheritance you receive before or after you have filed for bankruptcy. This article will educate on all the essentials concerning Chapter 7 Bankruptcy and Inheritance.
Inheritance Before Bankruptcy Filling
Any inheritance you receive before filing for bankruptcy will be counted towards the bankruptcy estate if you are unable to receive an exemption on it. You should be aware that the entitlement date is often considered as the date the benefactor passed away and not the date you actually receive the transfer of the assets. Hence, if you had filed for bankruptcy after a person passed away but you haven’t yet collected on your inheritance, it will be still be counted in the bankruptcy estate.
Inheritance After Bankruptcy Filling
If you inherited any form of assets after you filed for bankruptcy, it is yours to keep and will not be handed over to the bankruptcy trustee. An exception to this is the situation in which you are entitled to it within 180 days of your filing.
In this case, it would become part of the bankruptcy estate if you are unable to exempt it. The 180-days rule was enacted by Congress to prevent the abuse of Chapter 7 bankruptcy by people looking to file in anticipation of receiving a significant inheritance.
In addition to the trustee laying claim to your inheritance, you will also be required by the court to amend your paperwork to account for the transferred assets. This holds even if the court has closed your case. The type of form you will need to fill out will depend on what form of assets you inherit.
- If the inherited asset is real estate property, you will need to amend Schedule A.
- If the inherited asset is money or personal property, you will need to amend Schedule B.
- In either case, if you want the asset(s) to be exempt, you will also need to amend Schedule C.
Non-Filing Spouse and Inheritance
If your non-filing spouse inherited any assets during or before your bankruptcy, it would be considered separate property and not counted towards your bankruptcy estate. However, should they decide to transfer ownership of the inheritance, it will then could count towards your estate and thus, could be claimed by the trustee.
Hire a Professional Attorney
If you have received an inheritance and want to keep it safeguarded from your bankruptcy case, it can be worthwhile to take the advice of a professional bankruptcy lawyer to better understand your options. For a free consultation with a seasoned attorney, book an appointment online or call at 512-640-3340.