Bankruptcy & Inheritance Money

Inheritance money involves some special legal rules in a bankruptcy proceeding. The first thing to consider is whether the inheritance money is a part of your bankruptcy estate, and the next thing to consider is whether inheritance money received after your bankruptcy case ends must be reported to the bankruptcy court.

Bankruptcy Estate

When you file for bankruptcy, any money or property that you own as of that date becomes part of your bankruptcy estate. The property in a Chapter 7 bankruptcy estate is subject to liquidation by the bankruptcy trustee unless the property is protected by a state law exemption. Money or property received by inheritance before you file for bankruptcy is a part of your bankruptcy estate.

Time Frame

Additionally, inheritance money that you are entitled to receive but have not actually received as of the date you file for Chapter 7 bankruptcy is also a part of your bankruptcy estate. It is irrelevant that you have not yet received the inheritance if you have the vested right to receive it at some point in the future. If, for example, you receive notice on July 10 that you will be given an inheritance then file for bankruptcy on July 11 before your receive the inheritance money, that money is still a part of your bankruptcy estate.

Discharge

Interestingly enough, if you receive any inheritance money within 180 days after you file for bankruptcy, you must report this to the bankruptcy court. This is true even if you have already received your Notice of Discharge from the court. If you fail to report the inheritance, the bankruptcy court can actually revoke your discharge, dismiss your bankruptcy case and seize your assets.

Post-180

Any inheritance money that you receive more than 180 days after you file for bankruptcy does not have to be reported to the bankruptcy court.

References

• "The New Bankruptcy: Will It Work For You?"; Stephen Elias; 2009