What To Know About Inheritances And Bankruptcy
Even though you are filing for bankruptcy, there are some things that should be so special or so precious that they shouldn’t be taken in bankruptcy. One of those things is inheritance. Money or assets left to you by a loved one should be yours—after all, the loved one who left the property isn’t responsible for you filing for bankruptcy.
However, there is no actual exemption for inheritances. They are treated like any other kind of property. In fact, inheritances even get special treatment in bankruptcy, making them even more susceptible to being lost. If you are thinking of filing for bankruptcy and are anticipating an inheritance, timing your bankruptcy can be even more important.
The 180 Day Rule
This is because inheritances fall under what is known as the 180 day rule. To understand the rule, it helps to understand the two distinct periods in bankruptcy.
The first is before you file, and the second period is after the filing. Generally, stuff you acquire after you file is yours to keep. It never becomes part of what is known as the bankruptcy estate.
But inheritances are different. Inheritances are considered part of the bankruptcy estate, and thus can be taken by a bankruptcy court, if they are received by the filer within 180 days of filing the bankruptcy case. By “received” it means the date that you become entitled to the inheritance, even if you don’t actually have the inheritance in your possession. That usually is interpreted as the date of the death of the person leaving the inheritance.
As you can tell, this all means that you can acquire property through inheritance after you file, after your discharge is entered, and even after the bankruptcy case is completely closed.
You can exempt inherited property the way that you would any other property. However, because many inheritances tend to be larger amounts, it is unlikely that an inheritance would be completely covered by a bankruptcy exemption.
Strategies to Keep Inheritances
If you are expecting an inheritance, your best strategy may be to wait to file for bankruptcy. You may be able to utilize the inheritance in ways that it cannot be taken by the bankruptcy court, when you do file. Alternatively, you may want to file, if there is no apparent reason why you would get an inheritance in the near future.
Of course, anything can happen to anyone anytime, resulting in an unexpected inheritance, so to some extent, you can’t control when you receive an inheritance.
If you need bankruptcy right away, and do think an inheritance may be coming, you may be able to file for a Chapter 13. If the inheritance is too large, it may make the plan impossible, but if it is a more modest inheritance, a Chapter 13 plan may work, allowing you to keep the inheritance.
Plan your bankruptcy in advance, the right way. Contact the Boca Raton bankruptcy attorneys at the Law Offices of Stephen Orchard at 561-455-7961 for help understanding your bankruptcy case.