For many, receiving an inheritance can be incredibly bittersweet. However, for those going through bankruptcy, extra money can be a relief. However, you may be incredibly disappointed to learn that the money you’ve received can be considered part of your bankruptcy estate. As such, before you spend any of the funds, you’ll want to connect with an Orange County consumer bankruptcy lawyer for additional information on these matters. The following blog explores what you must know if this reflects your circumstances.
If I Receive an Inheritance During Bankruptcy, What Can I Expect?
When you are going through bankruptcy, receiving your inheritance can seem like a relief. However, it’s important to understand that your funds are likely at risk.
If you receive an inheritance during Chapter 7, you’ll need to determine if it’s part of your bankruptcy estate using the 180-day rule. Essentially, if you inherit money within 180 days of filing for bankruptcy, it will be considered part of your estate, even if your case has been closed. If you become entitled to the funds 180 days after filing for bankruptcy, you can keep the funds.
In the event you file for Chapter 13, the funds will generally become part of your estate and will be used in conjunction with other disposable income to repay creditors.
It’s also important to understand that you become entitled to the inheritance on the day the person from whom you ar receiving an inheritance passes away, and not the date on which you receive the funds. If the funds are part of your bankruptcy estate, you may be able to use federal and state exemptions to help protect the money
What Happens If My Spouse Receives Money During My Case?
If your spouse comes into money within 180 of you filing your bankruptcy case, it’s important to understand whether or not their funds are at risk. Typically, so long as your spouse does not commingle the funds, it will be considered separate property. However, if your spouse deposits the money in a joint savings account, it can be considered marital property and can be used to repay your creditors.
Though you may assume withholding information regarding an inheritance from your bankruptcy trustee is an easy way to ensure you can keep your money, there are serious implications for failing to report these funds. Information about inheritances is easy to through probate court records, and if your trustee discovers you did not report the funds, your case will likely be dismissed and you may face criminal charges.
If you’ve been considering bankruptcy, ensuring you discuss your circumstances with the team at the Law Offices of Michael D. Pinsky, P.C., is critical. Our firm understands that these matters, particularly issues involving inheritances, can be complicated. That’s why our firm is committed to helping you navigate bankruptcy. Connect with our team today to discuss your circumstances during a free consultation.
