You filed for bankruptcy in New York, and now you’ve heard that an aunt has made you one of the beneficiaries of her sizable estate. You haven’t received your discharge yet, so how much of that money will you be allowed to keep?
It’s a question anyone would ask when they receive an inheritance in bankruptcy. The answer depends on the circumstances surrounding the inheritance, such as:
- Which bankruptcy chapter you filed
- When you receive the inheritance
- Whether or not an exemption may apply
Which chapter did you file?
If the inheritance is received after you file, then it will likely become part of your bankruptcy estate. If you file for Chapter 7, then you may have to surrender the money or property to your trustee unless an exemption protects it from seizure. With Chapter 13, you won’t usually have to surrender it, but depending on the value of the inheritance, you may have to make bigger payments to your creditors.
When did you receive the inheritance?
If you receive the inheritance within 180 days of filing for bankruptcy, then you will have to amend your bankruptcy forms. It is important to remember that “receive” in this case really means “entitled to receive,” which is the date that your relative passed away.
- With a Chapter 7 case, if you are notified of an inheritance within 180 days after filing, then the asset(s) become part of the bankruptcy estate and can be taken unless it is covered by an exemption.
- If the inheritance is received 180 days after you file for Chapter 7, then it cannot be seized, even if it is not exempt. If you filed for Chapter 13, then the inheritance may compel a judge to amend your repayment plan, which can happen when your income or assets grow in the period between filing and the last plan repayment is made.
What if you don’t report the inheritance?
Few things can be more upsetting that receiving an inheritance that you may have to surrender. Don’t let your feelings cause you to make a bad decision. If the court or trustee learns that you tried to hide an inheritance, then your case could be dismissed and you may even be arrested for bankruptcy fraud.
If you are planning to file for bankruptcy in New York and believe that you may receive an inheritance in the near future, then discuss your situation with an experienced bankruptcy attorney. Jayson Lutzky is a Bronx, NY personal bankruptcy attorney with over 35 years of legal experience. It may be possible to protect most if not all of your inheritance with a state or federal exemption. Working with an attorney will ensure that you receive appropriate legal advice for your situation and don’t jeopardize the future discharge to which you are entitled. Mr. Lutzky offers free in-office initial consultations and can be reached at 718-514-6619.