Filing for bankruptcy is typically intended as a fresh start, allowing you to move past financial worries. However, life doesn’t stop during bankruptcy proceedings. A surprisingly common and stressful event people encounter is inheriting money or property after they have already filed their case. This situation raises several crucial questions: Will the inheritance have to go to your creditors? Can you legally keep any of it? Does the date of the person’s death matter? The answer depends on three key factors: the type of bankruptcy filed, the timing of the death, and the amount of protection available under exemptions. Please continue reading as we aim to clarify the basics to help you understand what to expect and what you should discuss with our Gillette Bankruptcy Lawyers.
Why Do Inheritances Matter in Bankruptcy?
When you file for bankruptcy in Wyoming, you establish a bankruptcy estate. This is a legal entity encompassing most of your property and related rights. In a Chapter 7 or Chapter 13 case, the bankruptcy trustee is tasked with collecting non-exempt assets and distributing them to creditors according to legal mandates.
It is important to understand that the estate’s scope extends beyond what you own on the filing date. In specific scenarios, it includes property you become entitled to after filing, such as inheritances received within defined time frames. This makes the timing of a loved one’s death and when your right to inherit vests critical.
For inheritances, bankruptcy law focuses on the date you became legally entitled to the property, which is normally the date of the person’s death, not the date the estate is probated or when you physically receive the funds.
Under certain chapters, if the deceased passes away within a specific number of days following your filing, the resulting inheritance may be included in your bankruptcy case. In other situations, an inheritance received years post-filing can still influence the amount you are required to pay creditors, even if the funds are not seized directly. Grasping these timing regulations is essential for developing a sound strategy with your legal counsel and ensuring full disclosure to the trustee regarding any assets they may be entitled to.
Should I Consult an Attorney?
Receiving an inheritance after filing for bankruptcy is a serious financial event that requires immediate consultation with an attorney. Engaging an attorney is crucial, as the inheritance may be considered part of your bankruptcy estate and potentially impact your case. Failure to disclose it is a mandatory disclosure violation that can result in harsh penalties, including denial of your debt discharge or criminal charges for bankruptcy fraud.
The specific impact will depend on factors like timing: if the death occurred within 180 days post-Chapter 7 filing, the funds typically end up in the estate, or, in a Chapter 13 case, if the inheritance is acquired before the case is closed, which may necessitate amending your repayment plan. An attorney at 307 Bankruptcy can help you navigate the complexities of this process, determine if any portion of the inheritance can be protected by exemptions, and ensure all necessary forms are correctly amended and filed with the appropriate court and trustee. This will safeguard you from legal repercussions.
