When you learn that you are being left an inheritance, you may be looking forward to the financial freedom that it may bring. Unfortunately, if you have previously declared bankruptcy or are in the middle of a bankruptcy declaration, then you may be concerned with how your inheritance may be affected.
If you hope to protect your inheritance, it will be important that you have an experienced legal advocate by your side. Contact Padgett & Robertson to schedule your free consultation. Call us at (251) 342-0264 to get started today.
Chapter 7 Bankruptcy and Inheritances
The impact that your inheritance will have in your bankruptcy declaration depends on which type of bankruptcy you were filing for. In Chapter 7 bankruptcy, you are allowed to retain possession of your necessities. But the vast majority of your assets will become a part of your bankruptcy estate. The estate sells your assets in order to recover a portion of your debt. The amount that is recovered is then distributed amongst your creditors.
The impact that an inheritance will have on your bankruptcy depends on not only the type of bankruptcy that you were filing but the time at which you are awarded an inheritance. For example, if you are awarded an inheritance within 180 days of filing for bankruptcy, you could reasonably expect that inheritance to be considered a part of your estate. If this happens, you will need to seek to have it exempted from your estate.
If your inheritance is awarded after 180 days have passed, it would be reasonable to expect that the inheritance would not become part of your estate and would therefore remain in your possession. If you are unsure how your inheritance will have an impact on your Chapter 7 bankruptcy declaration, be sure to reach out to an Alabama bankruptcy attorney with your specific questions and concerns.
Chapter 13 Bankruptcy and Obtaining Gifts or an Inheritance
Chapter 13 bankruptcy is much different from Chapter 7. In a Chapter 13 bankruptcy declaration, you are working with your creditors to formulate a repayment plan. Then, you are able to retain possession of your assets while you are repaying your creditors. If you are awarded an inheritance during your Chapter 13 bankruptcy, it may be considered part of your estate depending on when it is awarded.
If you receive your inheritance within 180 days of declaring Chapter 13 bankruptcy, the trustee would more than likely require that the inheritance be included as part of your estate. As you may know, this will likely increase the amount of your monthly repayment plan.
If your inheritance comes in after 180 days have passed, you stand a better chance of convincing the courts that the inheritance should not be included as part of your estate. You may be able to avoid having your inheritance be included as part of your Chapter 13 bankruptcy estate by getting it exempt.
If the inheritance is considered part of your estate, you can expect the trustee managing your Chapter 13 bankruptcy to seek to have the amount that you pay each month to your unsecured creditors increased. If this happens, it could have a dramatic impact on your monthly expenses.
For this reason, it will be critical for you to get an experienced bankruptcy attorney on your side. When you are struggling to make ends meet and attempting to rebuild your life, it is important that this inheritance be exempt and not considered part of your state. The inheritance could be exactly what you and your family needed to get a clean financial slate. But only if you can get it exempt.
Get Help from a Bankruptcy Attorney in Alabama
If you expect to collect a sizable inheritance and you have concerns that your bankruptcy declaration will have an impact on your ability to obtain the money that you have been left with, you may need a dedicated Alabama bankruptcy attorney to help.
Reach out to Padgett & Robertson for more information about how to best approach your case. Schedule your free, no-obligation consultation when you fill out our online contact form or give our office a call at (251) 342-0264.