An inheritance received after filing a bankruptcy case may become part of a debtor’s bankruptcy estate. In a Chapter 7 case, the trustee is likely to take it unless it’s exempt. In a Chapter 13 case, receiving an inheritance may increase the amount of money that must be paid to unsecured creditors.
A bankruptcy estate is created by the filing of a bankruptcy petition. The Bankruptcy Code (11 USC § 541) specifically defines the property that is part of the debtor’s bankruptcy estate. A trustee uses the pool of assets that comprise the estate to pay creditors.
Federal law further provides that this bankruptcy estate includes any interest in property that would have been the property of the estate if it had been an interest of the debtor on the date of the bankruptcy filing, that the debtor acquires or becomes entitled to acquire within 180 days after the bankruptcy case is filed.
Inheritances, bequests of personal property, and devises of real property received within approximately six months of the filing of a bankruptcy petition are considered part of the bankruptcy estate. Once the 180-day period has passed, Chapter 7 debtors are free to receive an inheritance without it becoming part of the bankruptcy estate.
However, in a Chapter 13 filing, the trustee may file a motion to require the plan be amended or modified because of the increase in the debtor’s income and assets during the three- to five-year repayment plan period.
In sum, any tangible or intangible property received by bequest, devise, or inheritance, becomes the property of the bankruptcy estate. Debtors are also required to file a supplemental schedule disclosing the acquisition of any assets after the case is filed within 14 days after the information comes to their knowledge.
Talk to the Morrison Law Group about how you may qualify for a Chapter 7 or Chapter 13 bankruptcy case. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.
