What if I receive an inheritance? | Local Bankruptcy Attorneys

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What if I receive an inheritance?

In a Chapter 7 bankruptcy, if you receive or become entitled to an inheritance within 180 days after you file, the inheritance becomes property of the bankruptcy estate. You are required to disclose the inheritance or the entitlement to the court. The purpose of this rule is to discourage debtors who anticipate an inheritance from filing bankruptcy when they think death is imminent.

The 180-day period begins to run on the date of your benefactor’s death. It does not matter that you might not receive any property for months or even years. After deduction of any exempt amount, the inheritance becomes property of the bankruptcy estate even if you do not receive it until after the 180-day period has passed. The inheritance will be used to pay your creditors first, and you will receive any amount remaining after they have all have been paid.

Under Chapter 13, an inheritance or an entitlement to an inheritance may become property of the estate even if it occurs after the 180-day period, so long as your case has not yet been closed. This can increase the amount you must pay to creditors under your plan. Any excess not required to be included in the plan reverts to you.