Receiving an inheritance from one of your family members or loved ones
can provide a great sense of financial relief, since you are granted what
is usually an unexpected source of money. For many inheritors, though,
they quickly lose most, if not all, of their inheritance due to the fact
that they recently filed for
bankruptcy. If you have filed for bankruptcy and will soon come into some inheritance,
you might be wondering if you will lose it to creditors and what you can
do to stop it. The answers all depend on the details.
Inheritance and Chapter 7 Bankruptcy
If you filed for
Chapter 7 bankruptcy and successfully liquefied all of your debts, then your upcoming
inheritance could possibly be claimed by creditors. It all depends on
when the inheritance was given to you. If the person leaving the sum to
you passed away less than 180 days ago, it is highly likely that the inheritance
will be considered part of your own bankruptcy estate. That is to say
that any portion of the inherited will be distributed to your creditors
until the money is all gone or all your debts are fully paid off.
You may be able to protect your inheritance after filing for Chapter 7
if you can list it as an exemption. Without the help of a professional
estate planning attorney, this can be extremely difficult to accomplish.
How Chapter 13 Bankruptcy Affects Your Inheritance
Just how it is in Chapter 7 bankruptcy cases, your inheritance will only
be "up for grabs" if you received it within 180 days of filing for
Chapter 13. Unlike other bankruptcy filings, however, Chapter 13 usually does not
actually assume control of your property for liquidation; instead, you
pay back your debt through a structured repayment plan. Inheritance will
be affected in much the same way – you will not necessarily lose
it but it will be used to fulfill any money you owe to creditors by increasing
your monthly payment plan amount. The idea is that creditors now know
you have more money available and are therefore able to ask that you pay
back what you owe them faster than before.
As you are not actually losing your inheritance directly after filing for
Chapter 13, it is usually not considered exempt. That is to say, it can
be a challenge to protect it from creditors and will likely be used to
pay off debts, one way or another.
Still Have Questions? Call 417.658.4172 Today!
Worsham Law Firm, our team of Springfield, MO estate planning attorneys have been helping
individuals and families deal with bankruptcy and inheritance issues for
more than 20 years. We understand that the very idea of losing your inheritance
to creditors after filing for bankruptcy might be upsetting, if not also
confusing, and we earnestly want to help you find peace of mind and a
beneficial solution to your case. Please
contact us as soon as you can so we can start providing you with the professional
guidance you deserve.