Deciding to pursue bankruptcy is never simple or easy. For many people who are suddenly faced with an overwhelming amount of debt, bankruptcy can be the best option, though still feel intimidating. Ultimately, bankruptcy allows an individual the opportunity to escape debt and create a better financial future.
The decision to pursue bankruptcy can be made much more complicated if a loved one recently passed away and you now expect to receive an inheritance. The following takes a brief examination of the interaction between bankruptcy and inheritance.
The Importance of the First 180 Days After Bankruptcy
The 180 days following bankruptcy is a critical time. During this period, any income that an individual receives becomes part of the bankruptcy estate. If a person receives an inheritance during this time, this amount will also be included as a part of the bankruptcy estate.
Consequently, if a loved one dies during this time, any inheritance that you are entitled to receive will become part of the bankruptcy estate. It does not matter whether you actually receive the amount during this window of time. Instead, legal entitlement is all that matters.
What it Means if Your Inheritance is Part of the Bankruptcy Estate
Following Chapter 7 and Chapter 13 bankruptcy, the issue of whether you can keep an inheritance depends on whether the assets are covered by a bankruptcy exemption. There are a number of complex laws in Florida regarding the assets that a person can keep after bankruptcy and a knowledgeable bankruptcy attorney can better explain how these regulations apply to your situation.
In many cases, inheritance will not be exempt from the bankruptcy process and will be used to pay off creditors if a person is navigating Chapter 7 bankruptcy or be factored into a repayment plan if an individual files for Chapter 13 bankruptcy.
Bankruptcy Trustees Must be Notified
If an individual files for either Chapter 7 or Chapter 13 bankruptcy and a loved one dies within the 180-day window of time, it is imperative that an individual filing bankruptcy notifies his or her trustee.
Even if you are worried that this means you will lose your inheritance, you must share this information so that the amount you are slated to receive can be used to pay your creditors. You also must inform the bankruptcy court. In many cases, receipt of inheritance during this time also means that you will need to revise critical bankruptcy forms.
Receipt of Inheritance after the 181 Days Have Elapsed
In situations in which a loved one passes away 181 days or longer after filing for bankruptcy, your inheritance will not be lumped into your bankruptcy estate.
This means that if you are navigating the Chapter 7 bankruptcy process, you will be permitted to keep your inheritance. If you have filed for Chapter 13 bankruptcy, however, the amount still might still be calculated into your repayment plan.
Contact a Skilled Bankruptcy Lawyer
Inheritance is just one of many things that can make the bankruptcy process more complicated. If you need the assistance of an experienced bankruptcy attorney, do not hesitate to contact Adam Law Group today to schedule a free consultation.