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The decision to file for bankruptcy is complex.
Filing for Chapter 7 or Chapter 13 bankruptcy can provide a “fresh start”. Nevertheless, the process isn’t easy. Losing a loved one during that time can add to the difficulty. As a result, you should know the impact inheritance has on your bankruptcy case.
180-Day Rule
Any income, including payroll, you receive within 180 days of filing for bankruptcy becomes part of the bankruptcy estate. Thus, any inheritance you actually receive within that 180 days becomes part of the bankruptcy estate.
Inheritance consists of more than financial payments. For example, if a will entitles you to property, that property is part of the bankruptcy estate.
While it may be tempting to wait 180 days to physically take possession of the inheritance income or property, however it won’t help. In fact, the bankruptcy law of 180 days abides by the date you became entitled to the inheritance.
Notification
If a loved one passes away and leaves you an inheritance of money or property within 180 days of filing for Chapter 7 or 13 bankruptcy, you must notify the bankruptcy trustee.
Contact your bankruptcy attorney to determine how and when to notify the bankruptcy trustee. Furthermore, amendments need to be made bankruptcy forms. Cherney Law can determine the forms based on the type of inheritance such as money or property.
Inheritance as Part of the Bankruptcy Estate
Keeping an inheritance, similar to your other assets, when filing for Chapter 7 or 13 bankruptcy is dependent upon state bankruptcy exemptions.
Bankruptcy exemptions are types and amounts of property you can keep. In Georgia, you may keep a portion of home equity, life insurance proceeds, household items, and tradesman tools. Additionally, you can file an exemption for $5,000 of value in motor vehicles and $500 of value in jewelry. Georgia does not allow for Federal bankruptcy examples..
- Read more on: The differences between Chapter 7 and Chapter 13
If your inheritance is not covered by a Georgia bankruptcy exemption, then the asset must be liquidated or sold for cash. In Chapter 7 bankruptcy, proceeds from liquidated assets are paid to creditors. Conversely, non-exempt inheritance assets are used for payment plan calculations in Chapter 13 bankruptcy.
Inheritance 181 Days After Filing
In Chapter 7 bankruptcy, if your loved one passed away more than 180 days after filing, entire inheritance is yours. Notification to a bankruptcy trustees or creditors is not required. Inheritance, regardless of date, is a factor in Chapter 13 bankruptcy. For this reason, non-exempt inheritance can be used to calculate your three- or five-year payment plan.
Spouse Receives an Inheritance
If you filed for bankruptcy apart from your spouse, then inheritance owed to them is NOT part of your bankruptcy estate. To this end, it is vital that your spouse keep the inheritance separate from marital assets. For example, if a monetary inheritance is deposited into a joint checking account, the funds are then part of your assets and can be used to pay creditors.
Call us Today to Discuss your Inheritance
If you are expecting or recently an inheritance, you need to speak with an attorney about bankruptcy and inheritance. Cherney Law Firm LLC is an experienced Marietta-area bankruptcy firm. Contact 770.485.4141 to schedule a free consultation.