When you are in the middle of a bankruptcy case, receiving an inheritance can seem like a blessing in disguise. You may feel relieved that you can build your funds back up with this money, especially if your assets are going to be liquidated as part of your Chapter 7 filing or you enter a long repayment plan through Chapter 13. However, before you spend the money, it’s important to understand whether or not it is considered part of your bankruptcy estate. If you are going through this process, connecting with a Shelby County, TN bankruptcy lawyer is in your best interest.
If I Receive an Inheritance During Bankruptcy, Is It at Risk?
Receiving an inheritance during your bankruptcy filing can be an incredibly tricky situation to navigate. Generally, if you inherit the money within 180 days of filing Chapter 7, these funds will become part of your bankruptcy estate, meaning they can be taken and used to pay creditors. If you receive the money 180 days after the filing date, the money will remain yours.
If you file Chapter 13, it’s imperative to understand that generally, this money will become part of your bankruptcy estate but will be used with your other disposable income to repay creditors.
It’s important to understand that you may be able to protect this property using state and federal exceptions.
What Happens if My Spouse Receives Assets?
If your spouse, who is not a part of the filing, receives an inheritance during the 180 days after you’ve filed, it’s imperative to understand what you can expect. Generally, these assets are considered separate property, and as such, you will not have to include them as part of your bankruptcy estate. However, if you combine these assets, meaning your spouse uses the funds to pay for joint marital property or puts the money in a joint bank account, it may be considered marital property and can then be part of your bankruptcy estate. As such, it’s imperative for your spouse to keep the assets separate so they do not lose their inheritance as part of your bankruptcy filing.
When you receive an inheritance, it may seem easy to simply not report it to your trustee. However, if you do not report it to the court, it can have serious implications. Though you may assume no one will find out about it, anyone with access to probate court records can easily discover how much you received from the estate of your deceased loved one.
Failing to report assets to the bankruptcy court can have serious implications, so it’s imperative to ensure you properly report the money received. If you do not, your case can be dismissed and you may even face criminal charges.
When you are ready to file for bankruptcy, connecting with an experienced attorney from the Arnold Law Firm is in your best interest. We understand how complicated these matters can be, which is why our firm will do everything possible to assist you in these matters. Connect with us today to learn more.
