When you file for Chapter 7 bankruptcy, your financial world will be completely exposed to your attorney and the trustee that is assigned to your case. Because of this, you may want to reconsider filing for Chapter 7 if you know that you will be receiving an inheritance in the near future.
Why would this matter?
Chapter 7 bankruptcies allow people to get rid of unsecured debts without ever repaying them. In return for the forgiveness of this debt, the trustee has the right to seize certain types of assets from filers, and an inheritance is one of these things. In addition to seizing inheritances, the trustee may also have the right to seize the following assets from you:
- Tax refund check
- Lawsuit settlement proceeds
- Valuable non-exempt items (such as a sport's car or boat)
The trustee will ask you if you have any of these things, or if you are expecting any of these things. You must answer honestly when asked, and if you answer yes to any of these questions, the trustee will be watching for you to receive them.
If the trustee can intercept any of these assets, he or she will use the money to repay debts that were discharged from your bankruptcy.
What rules should you know about this?
There are several important things to know when it comes to anticipated events like inheritance money, and the main thing is that the trustee will have the legal right to seize inheritance money for 180 days after you file. Therefore, if you receive an inheritance 200 days after you file, you should be fine; however, you must still disclose this information if you know about it when you file.
The other important thing to know is that it is not a good idea to hide money you receive after you file for bankruptcy. The trustee might not find out about it right away, but you could end up having to repay the money if the trustee finds this information in the future. It is always better to be honest when you file, during your hearing, and while the case is being settled.
If you need to file for bankruptcy, but are expecting an inheritance soon, it might be better to wait to file. You might be able to pay off the debts yourself with your inheritance money, and this would be the better route to take. If you decide to file for bankruptcy anyhow, contact a Chapter 7 bankruptcy attorney to get the process started.