An Inheritance May Not Be Helpful When Filing for Bankruptcy
If you are having financial problems, finding out that you will be receiving an inheritance can be a welcome piece of news. However, if you are thinking about filing for bankruptcy around the time you receive this information, you may have to rethink your plans.
How an Inheritance Can Affect Bankruptcy
An inheritance can affect your bankruptcy depending upon what type of filing you use. If you file for Chapter 7 bankruptcy, which is designed to wipe out your debts, the trustee of your bankruptcy case may use your inheritance to pay your creditors if you receive the inheritance within 180 days of filing for bankruptcy. This may occur even if the estate where the inheritance comes from is not settled during that time.
If you file for Chapter 13 bankruptcy, an inheritance may have a different effect on your case. In a Chapter 13 bankruptcy, consumers are required to repay their creditors according to a plan that has been approved by the bankruptcy trustee. Even if you receive your inheritance more than 180 days after filing for bankruptcy, you may be required to use the inheritance to pay your creditors. In these cases, the trustee decides how much of your inheritance should be used to pay off your debts.
Receiving an Inheritance Before You File for Bankruptcy
If you receive an inheritance before filing for bankruptcy, the trustee will take into consideration how much you inherited and what you spent it on. If you spend the money on luxury items like cars or jewelry, the trustee may seize those assets to pay your creditors.
Do You Need Help?
If you need help determining whether you should file for bankruptcy, or what type of bankruptcy action may be most beneficial for your circumstances, contact an experienced bankruptcy lawyer who can advise you of your options.