If you receive inherited money or property after filing bankruptcy it can impact your case. Timing is the issue. Inherited money or property becomes property of your bankruptcy estate if you receive it within 180 days of filing. It does not matter whether you have received it within the 180 days. Only that you become entitled to the inheritance within 180 days.
The consequences in Chapter 7 and Chapter 13 bankruptcy depend on whether the amount you are entitled to receive is exempt.
In a Chapter 7, the trustee has the ability to take the proceeds to the extend that they are not exempt, and distribute to creditors. If you have or expect that you may receive an inheritance you may want to file Chapter 13 bankruptcy so you do not lose the proceeds to a Chapter 7 trustee to distribute to your creditors.
In a Chapter 13 bankruptcy the amount that is non-exempt may impact the amount you pay back your creditors but you can often deduct and retain amounts that exceed your exemption amount, and most importantly, the funds are not just taken by a trustee. While a Chapter 7 case once filed becomes “involuntary”, a Chapter 13 case is always voluntary. You remain in control of your assets and you can decide if you want to continue the case or not if you receive an inheritance after filing.
Procedure: : If you real property within 180 days of filing you must amend Schedule A and exempt the proceeds to the extend you are able to do so in Schedule C.
If you inherit money or personal property you must amend Schedule B and exempt the property in Schedule C.
- If you inherit real property, such as land or a house, you must amend Schedule A. If you are claiming the property as exempt, you must also amend Schedule C.
- If you inherit money or personal property, you must amend Schedule B. If you are claiming the property as exempt, you must also amend Schedule C.
*if your spouse receives and inheritance after you filed for bankruptcy and they did not file then the proceeds are not part of your bankruptcy estate or reachable by a trustee.