How Does a Bankruptcy Filing affect an Inheritance?

Can You Potentially Lose an Inheritance if You Seek Protection in Bankruptcy?

You’ve had difficulty meeting your financial responsibilities, and have successfully discharged debts through a Chapter 7 proceeding. After the termination of the bankruptcy proceeding, you learn that you are the beneficiary of the estate of a loved one. What are the potential implications of your inheritance? Will you be required to give some or all of it to the bankruptcy court, to be distributed to your creditors, or will the money be yours free and clear?

What Happens to an Inheritance You Receive after the Completion of a Bankruptcy Filing

If you filed a Chapter 13 debtor’s reorganization, and you become the beneficiary of an estate before the three-to-five year repayment period is over, you must either demonstrate to the bankruptcy court that those assets are exempt, or you will be required to disclose and turn over any proceeds received as an inheritance. The court may reorganize your payments to creditors, or may use the funds received to pay off all your creditors and terminate the bankruptcy.

If, conversely, you filed for protection under Chapter 7, whether or not you must turn over inherited assets or funds depends on how much time has elapsed since you filed for bankruptcy. If the inheritance is within 180 days of your filing, it will be considered a part of the bankruptcy estate. Under such circumstances, the bankruptcy court can use it to pay your creditors, unless you can show that it is exempt property. Any portion which cannot be exempted will be used to pay creditors. Any inheritance you have the right to receive which arises more than 180 days after a Chapter 7 filing will not be a part of the Chapter 7 bankruptcy estate.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I offer a free initial consultation to all potential bankruptcy clients. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.