A loved one’s passing is always sad, but there are instances where funds from an inheritance can relieve serious financial problems. However, a bequest could be more complicated than you think if you’ve recently filed for bankruptcy. If you’ve inherited, or will inherit, assets after seeking Chapter 7 bankruptcy protection, it’s important to understand how the law applies to your case.
The Bankruptcy Code states that any inheritance directed to you within 180 days of filing for Chapter 7 bankruptcy becomes part of your bankruptcy estate. This means that the inherited assets are treated as if they were part of your property at the time you filed if the decedent passes away within that period regardless of when you receive the bequest. Upon receipt, the bankruptcy trustee responsible for managing your case can use the nonexempt portion of your inheritance to pay your creditors.
A key facet of the law is that the 180-day period begins on the date you file your bankruptcy petition, regardless of whether the legal process has been completed. You might receive a Chapter 7 debt discharge five months after filing, but if the inheritance comes two weeks later, it still would be subject to distribution among your creditors. In these situations, the filer is required to amend their bankruptcy paperwork to disclose the new assets. Failing to do so could result in serious legal consequences, including the dismissal of your bankruptcy discharge. Once you are 180 days past the original filing date, an heir may keep their entire bequest.
Whether you can keep your inheritance depends on whether it qualifies for an exemption under federal or state law. Exemptions allow you to protect certain types of assets from being used to pay creditors. After reviewing your situation, a qualified bankruptcy attorney can advise if some inherited funds could be protected through the state’s wildcard exemption, personal property exemption or the unused portion of a homestead exemption. Any part of the inheritance that is nonexempt will be turned over to the trustee to satisfy your debts.
Proper legal advice can ensure that you comply with the law while maximizing the assets you are able to keep. At Jeff Field & Associates, we represent Georgia residents in Chapter 7 proceedings and other types of bankruptcy matters. For a consultation, please call 404-381-1278 or contact us online. Our offices are in Douglasville, Gainesville, Bogart, Lawrenceville, Marietta and Scottdale.