Inheritances in Bankruptcy
The impact of an inheritance on your bankruptcy varies depending on the timing of the inheritance and whether you filed under Chapter 7 or Chapter 13. At Grainger Legal Services, an Alabama bankruptcy lawyer can advise you on the effect of an inheritance and help you navigate the challenges of the legal process.Inheritances in Bankruptcy
Most of your assets and property become part of a bankruptcy estate once you file for Chapter 7 bankruptcy. The date you are entitled to have the inheritance determines whether the inheritance becomes part of that estate or whether you can exempt the money from being taken to repay some or all of your creditors. Generally, your nonexempt assets and property in an estate are sold, and the proceeds are used to repay creditors. If your inheritance is considered part of the bankruptcy estate due to its timing, any nonexempt portion of the inheritance may be part of what is sold to repay your unsecured creditors.
The date of a death that entitles you to the inheritance will dictate the effect of the inheritance. Often, an inheritance moves through probate slowly, which means that you will actually collect it much later than the date that you are considered entitled to it.
If you are entitled to your inheritance within 180 days of filing for Chapter 7 bankruptcy, it will become part of the bankruptcy estate that may be sold in order to repay creditors. You will have to change your schedules and notify the trustee and court about the existence of the inheritance, even if you are able to exempt it. The nonexempt part of an inheritance is distributed to repay creditors. However, if you are entitled to the inheritance more than 180 days after filing for Chapter 7, it will not be part of the bankruptcy estate, and you can keep it irrespective of the applicable exemptions.
Chapter 13 bankruptcies reorganize your debt so that you can repay it. Generally, you propose a bankruptcy repayment plan when you file for Chapter 13, and this plan takes 3-5 years to complete. However, this plan may also be affected by an inheritance. Your monthly payments are distributed to creditors. When you acquire property, such as an inheritance, during your Chapter 13 case, it turns into the property of the bankruptcy estate. If you receive an inheritance while in Chapter 13 bankruptcy, you may have to increase your monthly payments.
If you receive an inheritance within 180 days of filing for Chapter 13 bankruptcy, you will have to pay certain creditors at least the equivalent value of whatever portion of your inheritance is nonexempt.Contact a Bankruptcy Lawyer in Alabama
An inheritance can greatly alter your financial circumstances. At Grainger Legal Services, an Alabama bankruptcy attorney can counsel you on the impact of receiving an inheritance during bankruptcy. From offices in Montgomery, Prattville, and Troy, debt relief attorney Charles E. Grainger can represent people throughout the state. Call us at (334) 260-0500 or contact us online to schedule a free consultation.