When you are going through the bankruptcy process, receiving an inheritance can feel like a blessing. Not only can these funds be set aside to help you rebuild your life once your case is finalized, but you may even be able to reward yourself for the hard work you’ve committed yourself to – right? Unfortunately, this is not the case. When you receive an inheritance during bankruptcy, that money can become part of your bankruptcy estate, meaning it will be subject to seizure under bankruptcy law. The following blog discusses these circumstances in further detail so you can learn what to expect and the importance of working with Franklin County bankruptcy lawyers to help you navigate these difficult times.
If I Inherit Money During Bankruptcy, What Can I Expect?
In the event you inherit money during the bankruptcy process, it’s imperative to understand what will happen to these funds. In general, if you inherit the money within 180 days of filing for bankruptcy, you are legally required to report these assets to the bankruptcy court, generally by amending the bankruptcy documents you’ve filed with the court. During Chapter 7, the assets will become part of your estate, meaning it can be seized and used as a means of repaying your creditors unless it is protected by an exemption. During Chapter 13, non-exempt property will be calculated into your current payment plan, thus increasing how much you pay your creditors each month.
However, if you receive an inheritance after 180 days of filing for bankruptcy, the process is different. If these are the circumstances for a Chapter 7 bankruptcy filing, you are generally entitled to keep these funds. During Chapter 13, on the other hand, a judge can consider these funds before determining whether or not to amend your payment plan.
What Happens if I Don’t Tell the Court?
Many assume that they can simply avoid telling the court they’ve received an inheritance to avoid losing these funds. However, this is far from the truth. In reality, you’ll find that all probate records are public, meaning any of your creditors or the trustee can easily uncover these records to show the funds you’ve received. Additionally, if a relative is unhappy with the portion of funds you received, they can even report your inheritance to the court to spite you.
If you do not report the inheritance and the court discovers this, it will likely seize the funds. In some instances, you can have your case discharged, meaning you will not receive any of the benefits of bankruptcy, nor will you have the protection of the automatic stay. In serious cases, you can even be charged with bankruptcy fraud, which is a serious criminal offense.
It can be disappointing to learn that the inheritance you hoped would help give you a fresh start after concluding your case will go to he bankruptcy court. However, the consequences of failing to disclose your inheritance outweigh the benefits of having the funds. As such, if you are ready to file for bankruptcy and you’re unsure where to begin, working with an experienced attorney with Cousino & Weinzeimmer LLC is in your best interest. Our team can guide you through this process and help you navigate complexities that arise, like an inheritance. When you need help, contact us today to learn how we can assist you.
