You may be absolutely crushed by the news that one of your closest family members has sadly passed away. This may be all the more devastating if you are going through a difficult time as it is; that is, if you are currently in the trenches of a bankruptcy case. However, the possible silver lining to all this is that your loved one may have left behind a significant sum of money for you to inherit. Still, you may be hesitant to accept this money because you are unsure if or how it might affect your ongoing case. Without further ado, please follow along to find out what happens if you inherit money during your bankruptcy proceedings and how a proficient Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C. can help you navigate this sensitive financial tightrope you are balancing on, so to speak.
Does it matter if I inherit money during bankruptcy?
If you are currently in the midst of a Chapter 7 bankruptcy case, any inherited money you receive within the 180-day window following your filing may become part of your bankruptcy estate. This means that your bankruptcy trustee may use this money to pay off your outstanding creditors. However, you may attempt to claim this inheritance as exempt under New York State bankruptcy law. Rest assured, any inheritance received after these 180 days is protected and yours to keep guarantee.
It is more likely that you will inherit money during your Chapter 13 bankruptcy, as your mandatory repayment plan may last anywhere from three to five years. If so, this inheritance may be considered part of your assets. Therefore, after having to report it to your bankruptcy trustee, they may require you to modify your repayment schedule. This may entail increasing monthly payments and thereby shortening its timeline. Though, there are still other important factors for your trustee to consider before making such a modification, such as your disposable income, the creditor claims against you, and much more.
Is there a difference if I inherit money before filing for bankruptcy?
On the other hand, say that you become entitled to receive an inheritance before filing for Chapter 7 bankruptcy. Well, similar to inheriting money within the 180-day window following your filing, these funds may become part of your bankruptcy estate. So, if you do not wish to lose them to creditors, you must attempt to protect them with state-specific exemptions.
One alternative to this is considering pursuing a Chapter 13 bankruptcy case instead. This is because now, you may have enough sources of income to qualify. In turn, you may be able to keep more of this inheritance by creating a three- to five-year repayment plan instead. Or, another popular alternative is asking the grantor of this inheritance to open a spendthrift trust on your behalf. This is because this trust type may not be claimed by creditors, according to the United States Bankruptcy Code. Therefore, these funds may not be incorporated into your bankruptcy estate.
Your bankruptcy proceedings should not go on without the wise legal counsel of a talented Rockland County bankruptcy attorney. So please call to schedule your free initial consultation with us at The Law Offices of Allen A. Kolber, Esq. today.
