“Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date –
(A) by bequest, devise, or inheritance;
(B) as a result of a property settlement agreement with the debtor’s spouse, or of an interlocutory or final divorce decree; or
(C) as a beneficiary of a life insurance policy or of a death benefit plan.”
What does this mean to the average filer?
Basically, if someone dies in the 6 months after you file bankruptcy and you inherit anything or receive life insurance proceeds, the inheritance or life insurance proceeds are part of your bankruptcy estate and could be used to pay the claims of your creditors. (§541(a)(5) also deals with property settlements in a divorce. This blog post focuses only on the inheritance issue.)
If you don’t want your inheritance to go to your creditors, you need to talk to the people you believe might leave you anything. Grandpa can change his will or life insurance beneficiaries any time until the day he dies. He can leave “your share” to your kids or other family members, remove you as a beneficiary, or include a valid spendthrift clause in his will. You could also disclaim any possible inheritance before he dies. Once he dies, you can’t retroactively change the will or disclaim the inheritance. If he decides to make any changes, he should speak with an estate planning or probate attorney.
You may feel the risk of someone dying and leaving money to you in those six months is slim. While you’re probably correct, remember that anyone can get hit by a bus tomorrow. And don’t forget about that great-aunt living in Las Vegas who is planning to leave you her $500,000 in gambling winnings. You might want to talk to her.
If you are considering filing bankruptcy, you need to carefully consider whether you want to (1) ignore this issue and hope no one leaves you money in the next six months, or (2) talk to your relatives about protecting any possible inheritances.
Image credit: Ken_Mayer/Flickr
I’m baffled as to why you say someone can’t disclaim an inheritance after the person has died. Of course they can. You make the qualified disclaimer in writing within 9 months after the person has died, and before the asset is distributed.
Thanks for reading.
Outside of bankruptcy, you’re correct. Anyone can disclaim an inheritance. But once the hypothetical beneficiary has filed bankruptcy, the right to disclaim belongs to the bankruptcy trustee, not the debtor. Therefore, the bankruptcy debtor cannot disclaim within 180 days after the petition has been filed, because the inheritance (or right to disclaim) is property of the bankruptcy estate.
The post is exclusively meant for bankruptcy debtors. Sorry for any confusion.
Bret, I have a question for you I hope you can answer? My Father died when I was 17 and both my mother And I live in the house! My bankruptcy attorney told me that If I filed chapter 7, I run the risk of them making my mother sell the house to pay off my debts! How can this be legal when the house hasn’t even been inherited by me yet because she is still living and has usufruct of the house! I was adopted at 5 weeks old by both my mom and my Dad and I’m not sure if I may have certain legal rights because of that? Could you please tell me if they can take my moms house from her if I file chapter 7 for $18,000 in debt?! I’m desperate to hurry up and file, but I don’t want that to happen to my Mom!!
I don’t know. It all depends on what your assets are and what exemptions are available. I’m assuming your attorney examined your file and spotted this issue. He/she knows more about your case than I do, and also knows more about what exemptions are available to you. Whether it’s a good idea to file all depends on your assets, your income, your exemptions, and where you live. I would advise you contact your attorney and ask for an explanation. The attorney should be able to tell you why the house is at risk. Good luck!
I think the reason the post is confusing is that you have not distinguished between disclaimers made before filing the petition in bankruptcy, and those made afterward. I believe that there is caselaw at the appellate court level that protects an interest validly disclaimed before filing the petition.
Thanks for reading. You’re right, anyone can disclaim an inheritance pre-petition. And under Wisconsin law, the pre-petition disclaimer precludes the inheritance from entering the bankruptcy estate.
The post was intended for those considering bankruptcy, while they still have the option, not distinguishing between pre- and post-petition disclaimers. I apologize for any confusion.
hello. I have a question. I live in Louisiana. My father passed away in feb 2022. He lived in TX. We are still waiting to get his estate probated (its only about $160K) divided by 5 siblings. So maybe i will get about $30K or so. If I file chapter 7 this month…how does that inheritance money get handled? I have tried to research it and it says if I can get it exempted maybe i could keep it. But I dont understand how to get it exempted. We may get the probate resolved by end of summer, which would be within the 180 days of filing BR. But he died last year…so not sure how that plays into it. thanks for your help.
Your share of the inheritance is property of the bankruptcy estate in any case you would file today. The date the probate case is closed or when you get the money is irrelevant in most jurisdictions. The date that matters is the date you were entitled to the money, which is usually the date of the death. This seems like a garden-variety exemption planning issue. Your attorney can tell you what exemptions are available to you. If you haven’t had a local attorney give you advice yet, NACBA has a good attorney finder. Good luck!
My brother just passed, his property is in bankruptcy chap 13, can I fight for his property by assuming the debt?
If the plan payments can still be made and it makes sense to let the Chapter 13 continue, the death of the debtor isn’t the determining factor in that decision. Talk to the attorney who filed the case. He/she can give you specific details.
I am two years into Chapter 13 and my mother recently passed away from COVID 19. I am the beneficiary for her life insurance policy. I also found out that my mother refinanced and left a mortgage debt in the amount of $40,000 @ 8.5% rate. I contacted the mortgage company and was informed I could just continue to make the monthly $443 payments while the loan remains in my mothers name, or I could assume the loan in my name. I will be submitting a petition as administrator to probate court in GA, where my mothers estate is located. My bankruptcy was filed in SC. There is land and another heir involved with the probate, but my sister pretty much emptied moms bank accounts and told me to handle everything. I told her not to touch the bank accounts and to wait on instructions from probate. Anyway, will I be able to keep the life Insurance benefit and what will happen since I’ve been “given” the house, the land it’s sitting on, along with the mortgage and property taxes?
I’m not sure. It all depends on your state’s probate laws, and your bankruptcy court’s rules. Since the death occurred more than 180 days after filing, the inheritance would not be property of the bankruptcy estate if you converted to Chapter 7. But converting might not be in your best interests, for multiple reasons. If you stayed in C13, the inheritance is part of the bankruptcy estate, but might not require a modified plan.
This is a very complex situation, that is full of minefields. Speak to your bankruptcy attorney immediately, so he/she can disclose what happened and file any documents that may be needed to protect your financial interests and assets. It’s never advisable to go into bankruptcy without an attorney (although it *is* allowed), but if you did so, NACBA has a good attorney finder. I believe you need professional assistance with this. Good luck!
Filed chapter 13 in Illinois in December of 2019 my dad recently passed May of 2021 and I inherited $18,000 what do you think will happen will my payments go up or do I have to turn in the whole inheritance? I contacted attorney but I’m at still awaiting an answer
I’m very sorry for your loss.
Contact your attorney again. You may have some exemptions that will protect the inheritance, or you can increase your payments to pay the non-exempt portion into the plan. Another possibility is converting to Chapter 7, since the right to the inheritance came after the 180-day rule, and wouldn’t be part of the C7 bankruptcy estate. Lots of moving parts, so don’t be shy about nagging your attorney. Call, email, or text him/her until you get a reply. Good luck!
Example question: If i file for chpater 7 Bankruptcy on January 1 and i have a potential inheritance already forthcoming but is EXEMPT because of a spendthrift clause, can I receive the inheritance after the bankruptcy discharge but before July 1? IN OTHER WORDS, is the exempt inheritance still exempt AFTER THE CHAPTER 7 discharge but BEFORE THE 180 DAYS FROM INTITIAL FILING?
Excellent question. Thanks for joining the conversation!
The right to receive any potential money would likely not be property of the bankruptcy estate (11 U.S.C. §541(c)(2)). The main reason spendthrift trusts are not property of the bankruptcy estate is that the trustee is not obligated to make distributions to the debtor. If the trust has a valid spendthrift clause under state law, the debtor cannot compel the trustee to distribute anything. In the debtor’s bankruptcy case, the bankruptcy trustee (it can get confusing with all these “trustees” running around) essentially steps into the shoes of the debtor. If the debtor can’t force a distribution, the bankruptcy trustee can’t force a distribution, and the trust remains safe.
HOWEVER, once the trustee decides to make a distribution, all bets are off. Once the funds are in the hands of the debtor, state law may allow creditors (including a bankruptcy trustee) to pursue those funds. Wisconsin Statutes §701.06(2): “…but a judgment creditor, after any payments of principal have become due or payable to the beneficiary pursuant to the terms of the trust, may apply to the court for an order directing the trustee to satisfy the judgment out of any such payments and the court in its discretion may issue an order for payment of part or all of the judgment.” (emphasis added)
With a spendthrift trust, payments don’t become due or payable to the beneficiary until the trustee decides to make a distribution. Once the trustee makes a distribution, the funds have become “payable” and judgment creditors (including the bankruptcy trustee) may seek to get paid from those funds.
Sorry for the excessively long answer, but it can get complicated. In your fact pattern, the right to receive payments from the trust would not be property of the bankruptcy estate. But if the trustee made a distribution to the debtor within 180 days of filing, those funds MAY be property of the estate and subject to a turnover demand from the bankruptcy trustee. The safer strategy is for the trustee to withhold all distributions to the debtor until the bankruptcy case has been closed and 200 days have passed since the bankruptcy filing.
I am caught in a discharged bankruptcy nightmare. I had no idea that there was a clause such as this when filing bankruptcy. Additionally, my mom passed away a month after I filed. The trustee got my portion of her estate dec29 when he filed notice for detbtors to make claims regarding inheritance. The deadline was March 11, 2016. Then an extension was filed for claimants to have until April 15,2016. Which forced me to file a tax extension for 2015. I’m starting to become nervous that I will NEVER see any of this money. I’m an educator and want to send my daughter to college. Is there a limit he can keep my money since it is more than I owed my debtors. Or is there any legal action that I have to regain the portion that is mine?
All of your creditors must not have filed claims by the deadline. The trustee only receives a commission on the money he pays out to creditors, not money he gives back to the debtor. So the trustee is trying to make sure as many claims get filed as possible. Once the trustee pays out all of the claims, he’ll return the balance to you.
You could ask your attorney to contact the trustee and get an estimate on when claims will be paid out. Your attorney could also propose that the trustee keep a little more than the total of all of the unsecured claims, and return some of the excess funds to you now.
I’m sorry you weren’t aware of this provision. Pre-bankruptcy planning could have avoided the entire mess.
My mother passed away 13 months ago. I was told all monies were to go to an I’ll sibling. Turns out some will come to me. I filed for bankruptcy a month ago. 12 months following my mother’s death, because I realized I was to receive no inheritance.And now I am? 180 day rules apply to me? … confused
The 180-day rule doesn’t apply, because you had the right to that money before you filed. Talk to your attorney immediately. He/she may be able to amend your exemptions to keep as much of the inheritance as possible. The asset must be disclosed either way. Good luck!
what happens in a 50% chapter 13 for 5 years, and a parent dies 20 months before the 13 is totally finished. Does the court take money from the inheritance to fully pay all creditors, in essence to repay at 100%, or can the remaining months be paid in full, at the time inheritance is received, and the whole thing be closed (discharged)
The inheritance may not be property of the bankruptcy estate, depending on your jurisdiction. Different courts apply §1306, §541, and §1329 of the Bankruptcy Code differently, some saying that an inheritance received more than 180 days post-filing is property of the bankruptcy estate, others saying it is not, and others saying that receipt of such a windfall requires a plan modification.
You should speak to your attorney to find out how your court handles such things. In any case, the inheritance should be disclosed to the Court and the trustee. Failing to do so may result in accusations of concealing assets.
Yes the trustee has hAd possession since the date of distribution on Dec 29, 2015. The creditors had a 90 daytime to file plus an extensions of 30 additional days and there is no action even though several claims have been filed to the trustee.
We are in Chapter 13 in Texas. My husband’s mom died and he will receive proceeds of 20k from the sale of her home. It is 180 days after we filed. Does this “inheritance” belong to the trustee?
It depends. Be sure to talk with your attorney.
If Mom died within 180 days of filing, the inheritance belongs to the bankruptcy estate, subject to any exemptions you may be able to claim. If she died later than 180 days of filing, it gets trickier. If you stay in C13, the inheritance is property of the bankruptcy estate, but *might* not require a modified plan. Depending on your individual circumstances, you might be able to convert to Chapter 7, and the inheritance would not be part of the bankruptcy estate.
Lots of moving parts, so be sure to disclose it to your attorney. Hiding things from the court or trustee is the way most people lose assets they might have otherwise kept. Good luck!
My Mom passed away Jan 20 from Covid. She left me through a transfer of death deed 1/2 of the house I have lived in for 10 years and also left me 6,000 from an IRA. I need to file chapter 13. Will the house and 6,000 have to go to the creditors?
Probably not. It all depends on what assets you can exempt in your state. Your attorney will be able to give you specific advice, but make sure you disclose all of this to him/her. Good luck!
I am confused; we originally went to b.k. paralegal dec. 24 th 2012 after months of getting b.s. answers and no action we found out her bar or st. lic. was suspended AFTER we paid her $200.00 we found another paralegal in april filed, in may dad died before we went to court. I was 1 of 3 in a “living trust” no funds so to speak but a home that was paid for sold for $205,000 escrow closes in a week and the funds go to “family trust acct.” in which my older brother and sister are named executors. to distribute at there discretion. I have filed 2 b.k. prior to this one was divorce from first wife second was got out of prison this time const. ate s^%t I dont mean to sound bad but this is my only chance to buy a house and pay cash (well a mobile home anyway) my intentions on letting trustee getting this money (about $65,000.00) is I would take death first WHAT DO I DO?? THANK YOU IN ADVANCE.
I can’t give you advice on this blog, but I can give some general information.
1 – A paralegal can help you prepare the papers, but can’t give you legal advice. It sounds like you actually filed pro se. If I’m wrong about this, you need to contact your attorney immediately and let him/her know about this inheritance.
2 – Whether or not you have an attorney, you have a duty to let the trustee, USTO, and court know about this asset. Disclosure is not optional. Without knowing the specifics of the will/trust/inheritance, I can’t say if it’s property of the bankruptcy estate or not. If you don’t already have an attorney, I recommend you contact a local attorney right away. He or she will be able to tell you if the inheritance is property of the bankruptcy estate, whether you have any available exemptions to protect it, and how much (if any) of it you’ll be able to keep. Your attorney will also be able to help you amend your Schedules B and C to disclose the asset and exempt it.
3 – Simply ignoring this issue and hoping the trustee doesn’t find out is a very bad idea. Doing so would violate the Bankruptcy Code and Rules, would risk having your bankruptcy discharge denied, and would risk the consequences of bankruptcy fraud.
My husband’s father died approximately 25 years ago. He died with out a will and we were told that my husband inheritance is split with his mother. He is an only child. We just found out that my mother-in-law wants to file for bankruptcy. We were wondering what would happen to my husbands inheritance?
That’s a question for your mother-in-law’s attorney. Depending on where you live, any inheritance due your husband should have already been received, given that the death occurred 25 years ago. If your MIL has been holding those funds for 25 years, they may be exempt. But in most cases, a third party’s bankruptcy will not affect someone else’s inheritance. This post refers to the situation where the bankruptcy filer inherits something within 180 days. If your husband isn’t filing bankruptcy, his inheritance shouldn’t be affected.
Me and my siblings are equal heirs of my dads estate, however my brothers portion is to be paid to him at the rate of $200 per week, and if he dies prior to receiving it all, the remaking portion would go to my granddaughter. I’ve learned that my brother is filing bankruptcy. Can the court take his inheritance considering my granddaughter is named as well, to his portion?
If he files bankruptcy, his interest in your dad’s estate will belong to your brother’s bankruptcy estate, subject to exemptions. He should make sure to disclose his interest to his attorney, so his attorney can do some exemption-planning before filing.
If me and my sister are in our mothers estate will and my sister is in bankruptcy can I still inherit my share?
Probably, but to be sure, talk to a local probate attorney. In general, if Mom dies while Sister is in bankruptcy, Sister’s share will go to the bankruptcy trustee, and no one else will be affected. But that’s not specific to your situation. The only way to get a specific answer to a specific question under your specific circumstances is to consult a local attorney. Good luck!
My husband filed a chapter 13 bankruptcy. I did not. His uncle died and left him money which his aunt sent him a check. He is being told it will be part of the bankruptcy estate BUT he is also being told his aunt also cannot turn around & write the check out to me if she feels like it because it would be part of bankruptcy anyway even though I never filed bankruptcy. I don’t understand this, I never filed bankruptcy if his aunt wants to leave me the money can’t she leave it to whoever she wants to? And why would any money left to me be part of my husband’s bankruptcy even though I never filed? Does this also mean if one of my family members died & leaves me money I won’t see a cent even though I personally never filed bankruptcy but my spouse did??
You need to speak with your husband’s bankruptcy attorney.
If the uncle left the money to his wife, she would be able to do anything she liked with it. But if the will left the money to your husband, once the uncle died, your husband had the right to the money. And since he’s in bankruptcy, that right went to the trustee. His aunt doesn’t have the right (again, depending on what the will said) to withhold payment or pay to a different person. She has to follow the directions in the will. His aunt can give you anything she wants from her own funds. But your husband’s inheritance does not belong to her and she can’t use it however she sees fit.
If you inherited something, it probably would not be property of your husband’s bankruptcy estate.
My sister is filing for bankruptcy, Chapter 7. She is the beneficiary on a bank account but wants to wait to collect the money until after her bankruptcy, 180 days later to claim it. What happens here? Will they find out?
Your sister must disclose this account to her bankruptcy attorney. If she has already filed and didn’t disclose the asset, she must amend her schedules to disclose and (hopefully) exempt.
In most cases, the date of the death is the triggering event, not the date the money is claimed. Anyone who would try to conceal this asset from the trustee and court would be guilty of bankruptcy fraud. Again, your sister needs to speak with her attorney before doing something foolish.
In answer to your last question, see this blog post.
my father was quit claimed 1/3 of a house and property from his uncle. a little over a year later my father died. 8 months later my/his uncle that deeded the property to him died. does my fathers 1/3 go to the other two nephews or does it go to my mother. my father had a will that stated all property went to my mother. my fathers will did not have to be probated because everything went to my mother.
Did any of these people file bankruptcy? If not, the answer will depend on your state’s probate laws. I’m not an expert in probate, but in my opinion, your father owned the 1/3 interest when he died, and that 1/3 interest passed to your mother. Once he quit claimed the property, your uncle had no interest in the property. Therefore, when (or even if) he died makes no difference regarding the title to the property.
Of course, you shouldn’t rely on a blog posting for legal advice. I’m only licensed in Wisconsin and I don’t practice in probate law. If you want legal advice, speak to a local probate attorney. Good luck!
I am currently in a chapter 13 bankruptcy that I started before I married my husband he was recently in a accident in his truck he purchased before we were married and received a settlement can my trustee take his settlement?
Probably not, but you should check with your attorney. Chapter 13 bankruptcy practice is very localized, so your attorney can tell you if the settlement is exposed, or if you even have to disclose it to the trustee and court.
Since I don’t know the specifics of your case and don’t give legal advice on this site, the bankruptcy attorney who filed your case is the best source of information. Good luck!
Hello. I’m in a chapter 13 four years down, with only six months left. Yay ! My Grandmother dies in March and has left me 25% of her very large estate. I do not know the exact amount, nor do I know exactly when I will receive it. If I get it before the bankruptcy is over (6 months) do I have to give it to them and my unsecured creditors? Can I just pay the remaining $10,000. and be done? I’m in Maine. Thank you
You need to talk to your bankruptcy attorney immediately. Different courts apply §1306, §541, and §1329 of the Bankruptcy Code differently, some saying that an inheritance received more than 180 days post-filing is property of the Chapter 13 bankruptcy estate, others saying it is not, and others saying that receipt of such a windfall requires a plan modification.
In most cases, the triggering event is the death, not the date you receive the money. Your attorney can tell you how your court handles such things. Keep in mind that failing to disclose may result in accusations of concealing assets and put your Chapter 13 discharge at risk.
I am at the very end of my Ch. 13 with all payments current. My trustee is wanting to dismiss my Ch. 13 and convert to Ch 7 because of a large inheritance I became illegible for 2 years ago but have not received due to the property not selling. How can my case be dismissed if I have met all plan requirements? I will lose my home in Ch 7 due to equity if my equity is not calculated at original filing date of Ch.13. I can’t believe I am going to lose my home because my father passed!
This is something you need to discuss with your attorney asap. In most cases, the day you receive the right to payment is the important date, not the day you actually receive the money. Your attorney can explain more and give you advice on how to proceed to protect as much of your property as possible. The trustee can’t give you legal advice and isn’t working for you.
My husband and I filed ch 13 bankruptcy in 2019. This is our first time ever filing bankruptcy not knowing or fully understanding while in bankruptcy we applied for a credit card. We both were approved & used card to travel to my grandmas funeral. Can trustee dismiss our bankruptcy case?
It really depends on your jurisdiction and how your attorney handles the disclosure. Here, debtors are not allowed to incur debt without prior approval. If it is an emergency, we *might* be able to get approval after-the-fact. But you should disclose this to your attorney as soon as possible. He/she will also ask if you received any kind of inheritance, as that may be part of your bankruptcy estate. Good luck.
Hello,
I am in the process of considering bankruptcy. However, my father died some 7 years ago leaving his estate to be evenly split between myself and my sister. Due to family squabbles the estate probate remains open and the estate assets have not been dispersed. Would my inheritance still be part of the “bankruptcy estate” even though my father passed away well before the 180-days-prior-to-filing and 180-days-after-filing” window. My bankruptcy attorney says “yes” but everything I’m reading seems to imply otherwise. I live in Arizona. I really need to know which is correct.
Your attorney is correct. Section 541(a)(5) of the Bankruptcy Code says that inheritances within 180 days after filing are property of the estate. So the “180-day” rule is inapplicable to your situation.
But you do have a right to payment from your father’s estate, and that right is an asset to be either surrendered or exempted. Whether you’ve received it or not is immaterial; you have rights in the probate estate today. Think of it this way: the asset you have right now is the right to be paid from the estate, sort of an account receivable. I don’t know if your attorney has any exemptions available to protect that right from the bankruptcy trustee, but that right will definitely be part of your bankruptcy estate.
Since your father died seven years ago, I assume it’s too late to disclaim your interest, but you should ask your attorney if that’s an option. Alternatively, you could wait until the probate estate is settled, and follow your attorney’s advice as to how to invest the proceeds to protect as much as possible. Since it’s been pending seven years, it’s likely that legal fees have eaten up a good share of the estate anyway.
My grandmother left me $10k when she died in 2010. My bankruptcy was discharged in Sept 2015 and I just received note that final judgement and payout will be next month for remaining balance. Is the trustee still entitled to my money even though it’s been more than 2 years?
Probably. It sounds like you had the right to the $10,000 when you filed your case. Unless you disclosed and exempted it, it still belongs to your bankruptcy estate. The 180 day rule applies to inheritances from someone who dies within 6 months AFTER filing the bankruptcy. If they died before filing, the right to inherit existed at the time of filing and must be disclosed. Talk to your bankruptcy attorney immediately and explain the situation. He/she may be able to protect much of the inheritance.
I filed chapter 7 bankruptcy. My mom passed away before 180days. I reported to my attorney. She owns a mobil home worth approximately 30,000.00. I’ve lived here for 5 years . Can I keep under the homestead exemption of 75000.00 since it’s worth a lot less
That’s a question for your attorney. He/she knows your case much better than I.
However, assets are usually fixed at the filing date. If you couldn’t have claimed the homestead exemption when you filed, you probably can’t claim it now. In other words, your mother didn’t leave you a homestead, she left you generic personal property (the mobile home.) But you might have exemptions available to protect it, depending on where you live. Again, your attorney will have much better info. Good luck!
My mother recently filed for bankruptcy. In the time just prior her father passed away and she was the sole beneficiary on his life insurance, with the expectation from her father that she would split the money evenly between her and her brothers (I believe it is stated in the will, but am unsure.) She checked with her bankruptcy lawyer prior to splitting said money and was told it would be fine. They went to bankruptcy court last month and this past week all of her brother’s received letters stating that she didn’t have the right to give the money and they need to pay it back. Her brother’s are all getting their own lawyers, but could you explain how, when she was told by her bankruptcy lawyer it was fine, the court is now requesting that money back?
There are a lot of possibilities:
– The lawyer was wrong.
– The letters were sent by a trustee who is hoping the brothers will just cave and send him money.
– The letters were sent by a trustee who has already got a court order saying that your mother did not have the right to distribute the money.
I doubt that the letters came from the court. They probably came from the trustee who is seeking to bring those funds into the bankruptcy estate. If the brothers hire lawyers, it will either be settled or tried in front of a bankruptcy judge, who will make the final decision.
Hi my father died seven years ago. My father co-owned a piece of land in the Philippines with his two other siblings. Recently, the co-owners have decided to sell the property. Last I heard they are in the process of closing the sale. I filed for bk 7 March of this year. My father’s share/interest would have automatically gone to my mother however she just recently decided to waive off her interest and so now it’s being passed on me and my other three siblings. I was not aware of this not till after I filed my bk7 that’s why I didn’t even include this property to my list of assets in the first place. Having said that could you explain to me how the 180 days applies to me and the fact that my mom just recently passed on her interest to us children how does this affect my situation as well as my bk. By the way I have learned recently that my bk has just been recently discharged and closed. Also I want to know when is an inheritance considered received, is it upon death of your father or upon settlement of the estate by an extrajudicial agreement? (although again my mother was suppose to be the successor of my father’s interest if he were to die) Is the waive effective to exclude what I would receive from creditors? Kindly explain and break it down. Your response will be greatly appreciated. Thank you!
Your first step is to contact your bankruptcy attorney and tell him/her the whole story.
In general, the right to receive an inheritance occurs at the death of the testator. But as I understand it, you had an interest in the property when you filed your bankruptcy, even if you didn’t know it. Section 541(a)(5) doesn’t apply in this situation (because you owned the right before you filed, not within 180 days after filing). Since the property right wasn’t disclosed, it was never abandoned from the bankruptcy estate.
Your attorney can reopen the bankruptcy case, disclose the asset, and exempt whatever is possible. Depending on how much is at stake, the trustee will either abandon the interest or administer it for the benefit of your creditors.
But the most important thing is to tell your attorney as soon as possible. It’s easier (and usually less expensive) to deal with these things sooner rather than later. If the court or trustee suspects you were trying to conceal an asset, you may have a bigger problem.
Hello I am claiming bankruptcy as soon as I have the money. I am filing for medical bills and some credit card debt. But the big thing is my student loans. My son is very sick and I cannot work. Now my mom is on her death bed and I am about to inherit money. The thing is my husband is the only one working by my son is so sick. So we would like to get a reliable car and my husband is going to build us a house with the left over money. I haven’t claimed bankruptcy yet, my lawyer said I needed to put the money into a trust and I cannot receive the money until I am 31, I am 29. My mom put that in her will, but she just changed it because she wants us to have two cars and have a reliable car for me. So what I’m wondering do I wait to file for bankruptcy before I get the money?
I don’t give legal advice on this site, only general information. Your attorney is the best source for information specific to your case.
Depending on where you live, what exemptions are available, and how much Mom has, maybe she could buy the cars for you now. Or give a gift of the cars after you file. There are a lot of options, but your attorney is the only one you should trust to give you legal advice specific to your situation. Good luck.
My last surviving parent recently passed away and left some money behind. One of my siblings was the sole beneficiary on the account that has the money. If the sibling gives me $ from that account, must I still report it to the Trustee? What if I receive material goods (i.e., furniture) or payment of services (i.e, car repair) as gifts in lieu of cash from the sibling paid from funds in the account, must I report receipt of those gifts to the Trustee?
Your first step is to contact your attorney. He/she will be able to give you advice specific to your situation. Even if it’s not property of the bankruptcy estate, disclosure is never a bad idea.
In general, if a debtor in bankruptcy receives anything “by bequest, devise, or inheritance” within the 180 days after filing bankruptcy, it belongs to the bankruptcy estate. Your attorney may make the argument that it wasn’t by bequest, devise, or inheritance (and I think it’s a pretty good argument), but that would be a question of law for the judge to decide. Once anything goes to a judge, there are no guarantees. Assuming you weren’t entitled to receive anything from the estate, it may be safer to wait until after 180 days from filing to accept any gifts from your sibling. But again, your attorney is the best source of information for your particular situation. Good luck, and thanks for reading.
If a parent dies after a chapter 7 is filed, within the 180 day period, is there any exemption under Wisconsin or Federal law for life insurance proceeds owed to the Debtor due to the parent’s death?
Thanks for reading.
It depends on how much the proceeds are. If the debtor was a dependent of the parent, §522(d)(11)(C) should work to protect the amount reasonably necessary for support. There is also a wildcard exemption available up to $12,725 (522(d)(5)); if the debtor did not use all of the wildcard to exempt other assets, he/she could amend the schedules to exempt as much of the life insurance proceeds as possible.
Under the Wisconsin exemptions, there is no wildcard. However, 815.18(3)(i) Stats. has the same provision as the federal exemptions if the debtor was a dependent of the parent.
But a debtor should contact his/her attorney immediately for advice specific to the debtor’s situation.
Wow, great information, thanks!
Glad to help.
Converted a Chapt 13 to a 7 after spouse was laid off from company. Then father dies within 180-period. I am executor of parents’ estate and also named single beneficiary of a leftover annuity. However, the annuity is to be included (though not listed in will specifically) as portion of 50/50 split with sister and distributed In parent’s succession. Can I make agreement/amendment with sister to give her an increased portion of parent’s succession equal to her half of annuity dollar without being considered fraudulent? I would cash annuity and make appropriate BR schedule amendment, but don’t want to appear as avoidance of taking my full 50% of parents inheritance. (La. Estate Succession/Federal BR filing)
You need to speak with your attorney ASAP. Bankruptcy law is very court-specific. *IF* the inheritance is property of the bankruptcy estate (death occurred within 180 days of the original filing), you shouldn’t do anything until you speak with your attorney. He/she will be able to tell you how to proceed. If you dispose of funds before the trustee learns about them, you may risk your discharge and criminal charges.
My Mother and father had a trust – My father passed away in April 2015 – My mother is now rolling over part of that trust into a new trust (and leaving the original).
I declared bankruptcy in August 2014 and was discharged in January 2015.
The attorney for the trust asked for our social security numbers and addresses.
I have two problems – questions.
I don’t want my family to know about my bankruptcy
Also, since my mother is not deceased and it’s been over 6 months, can my discharged creditors come back for my share?
Your bankruptcy attorney can give you information regarding your specific case. As a general matter, if you didn’t receive a right to any property within 6 months of the bankruptcy being filed, your discharged creditors would not have any rights to any funds you may someday inherit.
Our parents left us land to be divided between 6 children , my brother is thinking filing bankruptcy can it affect our inheritance
Not really. His bankruptcy could only affect his interest in the inheritance. The question is whether he can exempt his share. Your brother should make sure to tell the attorney about this issue. He/she will be able to advise what exemptions are available to him and whether any of his assets are at risk. In any event, he should *not* try to “game the system” by disposing of assets before filing. If he doesn’t already have an attorney, NACBA has a good attorney finder. Good luck!
I filed my bk 7 in March 2015. It was closed in June 2015. I recently found out that a property offshore that belongs to my grandmother is for sale. The property in question is in my grandmother’s name and has been since 1949. She passed away over 40 years without a Will. At the present time the property is in the process of being transferred over to her heirs (my father, and his three other siblings) and is scheduled to be put on sale. However, my father passed away in 2009 and left no Will. The property will be in probate. I will be entitled to receive an inheritance through extrajudicial settlement. Can I receive this inheritance without affecting my already closed BK 7? By the way, my grandfather passed away before my grandmother.
You need to speak with your bankruptcy attorney. If you had any interest in the inheritance when you filed your bankruptcy, even if you didn’t know about it, the bankruptcy estate still owns it, since undisclosed assets are not abandoned at case closing. If you filed pro se, you should contact a local bankruptcy attorney. See NACBA.org for a listing of bankruptcy attorneys close to you. Good luck!
Thank you for your reply. Just a follow-up question (sorry if I’m still a bit confused). But isn’t it that my right/interest to the estate only exist once my grandmother’s estate gets transferred over to her heirs? Until now (post my bk) the estate is under her name and like I mentioned above didn’t leave any Will. Kindly clarify. Thank you!
It’s a question of state law (which is why you should talk to your bankruptcy lawyer.) In Wisconsin, the right to inherit usually happens at the moment of death. When Grandma died, her heirs had an interest in her estate, whether or not they acted on it or received anything at that time. When your dad died, his interest passed to you. Therefore, you had an interest in the estate (even if you didn’t know about it) at the time you filed.
Again, you really should talk to your bankruptcy attorney to get advice on how to proceed. If this right to inherit is property of your bankruptcy estate that was not disclosed, your attorney should be able to minimize any damage or losses.
My brother was in a legal case for partition of our deceased parents property in India against their registered will in favor of our sister,since 2012 He filed for CH. 7 in July 2015 and his case was closed as no asset case. When we raised this issue with Indian court for dismissal on this groun, his lawyer moved motion of reopening of CH. 7 case on 11 USC 541 (e) that he has got eligible for inheritance but did not disclosed the legal case since 2015.
1)Can I contest the reopening of his CH. 7 case there in USA and what would be consequences for my brother in USA?.
2) can I settle matter directly with Trustee of the case as settlement?
Good questions, but this matter is complicated, so you should not try resolving this by yourself.
In some jurisdictions, judicial estoppel would prevent the debtor in bankruptcy from exempting any undisclosed asset. But the trustee may reopen and try to administer the asset, so you (or your lawyer) *might* be able to negotiate with the trustee. The short version: if the debtor in bankruptcy said he did not have a right to any real or personal property in India when he filed bankruptcy, the court in India might hold him to that statement. If the debtor reopens the bankruptcy case to disclose the asset, the bankruptcy trustee might object to the exemption, alleging that the debtor attempted to conceal the asset. But it’s all very fact-specific, so you (or your attorney in India) should contact an attorney in the jurisdiction where your brother filed his bankruptcy.
Thank you very much sir, for educative reply.
Just one imp. point I want to draw you attn. to for your advice i.e., the motion moved by my brother for reopening CH. 7 case is :
1) not to amend schedule for asset forgotten/ omitted in original filing i.e. ongoing legal case since 2012 in India but he has moved motion that..
“It seems he has got eligible for his share in inheritance either on the day of filing or within 180 days…”
What I understand “he has even now not disclosed pending litigation in India” and again has done purjary as the case for BK was filed in July 2015 and motion has been moved in mid April I.e. 9 months after filing for his BK.
Request you to educate me if I am correct on my above conclusion so that I can prepare myself accordingly.
I don’t give advice for specific situations on this blog, only general information.
If the case is reopened, you (or your attorney) can file an objection to any exemptions. In general, anything that the debtor owned, including the right to sue anyone, as of the date of filing was part of his bankruptcy estate. If he didn’t disclose it in the original filing, it was never abandoned by the bankruptcy trustee, and the trustee can now administer it. If the debtor inherited something within 180 days after filing, that was also part of his bankruptcy estate.
I have a dispited inheritance property share of around $ 188000. And planning to file for chapter 7 in Arkansas.
I don’t know if I will get any share in disputed inheritance, hence want to avil what I am having in my possession such as my house in AR etc.
Can I somehow bring this disputed inheritance share under exemption somehow so to retain it if I get any share
OR such a big amount will not be spared by Trustee.
You need to disclose the inheritance to your bankruptcy attorney before you file. He/she will be able to tell you what exemptions are available in Arkansas. If there aren’t any available exemptions, your attorney will help you with permissible exemption planning. If you haven’t hired an attorney yet, go to NACBA.org and find someone close to your location. Good luck!
I am about to file BK CH 7 and
I am in a litigation for alleged share in an inheritance property of my late parents for last 4 years.
Where in my schedules I must mention this asset?
1) Property I own (alleged share in inheritance).
OR
2) legal right to sue weather sued or not?
OR future claims?
That’s a question for your attorney. He/she can tell you whether it belongs on line 30, 32, 33, 34, or somewhere else. Your attorney can also tell you if you any exemption available to protect the expected recovery.
It might make sense to wait until the litigation is completed before filing the bankruptcy. Otherwise, the trustee may take over and settle for less than your current attorney and use the proceeds to pay your creditors. This is a dangerous area, and your bankruptcy attorney needs to have all of the facts before filing.
How does bankruptcy effects the Power of Attorney already given to someone to present principal in court of law in a property case.
1) does powerof attorney become void on filing bankruptcy?
2) can a new power of attorney be executed after discharge in BK for any legal case pre existed (before BK) legal case?
In general, a Power of Attorney is unaffected in a bankruptcy, because it’s not an asset with any value to the bankruptcy estate. But if someone filing bankruptcy has power of attorney for someone else, it should be disclosed to the bankruptcy attorney to make sure there are no exceptions.
My spouse and I are almost 2 years into our chapter 13 bankruptcy. He is now terminally ill. I have a spousal life insurance policy on him through my place of employment. In the event of his death, will the proceeds from this policy go into my bankruptcy or will i be able to use it to pay for his final arrangements and to substain our family in his absence?
You need to speak with your bankruptcy attorney soon. In most cases, you’d be able to keep the insurance proceeds. But your attorney can tell you if it makes more sense to continue the case, apply for a hardship discharge, convert to Chapter 7, or something else. There are a lot of options, and your attorney is the best source of information.
Can a Power of Attorney executed after discharge & closure of BK Chapter 7 for an asset NOT disclosed in Schedules and surrendered to the Estate.
The right in concealed asset is still legally contested in court of law by the debtor during and after closure of Chapter 7.
If not, then what could be its repercussions for the debtor?
Those are all questions for the debtor’s bankruptcy attorney.
As a hypothetical, the answer will likely depend on state law. If the asset was never disclosed in the bankruptcy, it was never abandoned by the trustee. Therefore, it may still remain property of the estate. Repercussions for not disclosing an asset could range from legal fees to reopen and disclose, all the way to criminal prosecution for fraud and revocation of discharge. But it’s very fact-dependent, so the attorney should be informed of this immediately.
Evil sister is selling inheritance home. I own 1/3 can I purchase the home through bankruptcy?
I don’t know. It depends on whether the house is property of the bankruptcy estate. If it is, and the trustee sells it, anyone can make an offer. I don’t see how Evil Sister’s sale can close if all of the owners don’t sign off.
Hi, My husband and I filed for bankruptcy chapter 7 in Sept we had our meeting of creditors on Oct 21 and we are just waiting for the discharge now. My husbands father just past away two weeks ago and his brother told him he may be getting some of a small life ins policy probably about 9k. Will the bankruptcy trustee take this from us or are there exemptions for this? We are in Maine.
I don’t know if there are exemptions available to you, as I don’t practice in Maine. The $9,000 definitely has to be disclosed to the trustee, the USTO, and the court. Simply keeping quiet is not an option. Your attorney can give you more advice on how to supplement your schedules and file them. With any luck, you’ll have exemptions available to protect at least some of the insurance proceeds.
Thank you, I figured we would have to disclose the money. We had not expected this to happen nor did we know about the policy but the his brother mentioned it this past weekend it got me thinking they will just take that from us.
Maybe. But if your attorney is good, he/she may find something that will let you keep some of it.
If a discharged Debtor reopens his closed bankruptcy by motion that he MAY have become eligible for some inheritance within 180 days of filing but does not file any amended schedules or give details to the Court fior a long time. What are the powers and process of trustees to proceed?
If this is an actual situation, speak to your attorney.
As a hypothetical, anyone *may* become eligible, but only those that *do* are required to inform the court. If the trustee believes there may be nonexempt assets to administer, he/she will likely move to reopen the case. The debtor would then have to cooperate with the trustee. Any assets of the estate (including inheritances) that are not disclosed on the schedules are never abandoned to the debtor, and the asset will remain property of the bankruptcy estate until this is remedied.
Me and my ex husband were in Chapter 13 together and he passed away last September. I received some Life insurance proceeds that I turned over to my bk attorney. The estate is trying to get it because in our divorce decree I gave up any inheritance, We have a hearing next week with the BK Court to give instructions on the Life Insurance. What could happen here? Keep in mind we had a minor child together who lives with me>
Your bankruptcy attorney is working for you, so you should ask him/her.
Whether the proceeds come into the bankruptcy estate depends on local custom. Some courts hold that inheritances/life insurance outside of 180 days from filing are subject to liquidation, or grounds for a plan modification. Others hold that the funds are property of the estate (so they are protected by the automatic stay), but are not considered for purposes of the Chapter 13 liquidation test.
It’s a complicated matter, so you should ask your attorney to explain the possible outcomes.
Does Trustees of BK CH-7 have right on undisclosed assets for 7 YEARS Only from date of filing of BK Case? OR there is no time bar for trustee to chase assets of BK Estate even if they have not been disclosed in Schedules or Concealed for the Trustee? Pl. Guide.
If assets are not disclosed on the bankruptcy schedules, they are never abandoned and remain part of the bankruptcy estate forever. In the case of inheritances, only rights that arise within 180 days of filing become part of the bankruptcy estate. If a debtor becomes entitled to receive an inheritance 190 days after filing, the bankruptcy estate (and trustee) have no interest in it.
If trustee files his wrong report of NO ASSET but there is evidence of existence of Estate Asset (pre petition pending probate litigation) then:
1) where it can be reported?
2) Will court take cognizance of this fact & refuse to close the case?
3) Can trustee revise his report on pointing out his fault?
4) How a party who wants to buy this litigation rights should proceed to pursue this matter & don’t let the case closed without trustee replacing plaintiff of liquidation of litigation rights?
1 – If this is a pre-petition claim that wasn’t listed on the schedules, the debtor is required to amend the schedules to disclose it. If the debtor refuses, anyone could contact the trustee and rat the debtor out.
2 – The case would close as usual, unless the trustee withdraws the no-asset report.
3 – The trustee can withdraw the report if undisclosed assets are discovered.
4 – If the trustee has an asset to administer, anyone can contact him/her to make an offer to purchase the asset.
I have a 1/4 inheritance of my parent’s home through succession from when my father passed 8 years ago, since he had no will. I never wanted any of the home ownership since it was my mother’s and father’s home. I had planned to sign over my portion to my mom, but never did. Now I am looking at filing chapter 7 in GA, but lived in TX last year, which means I would be able to claim TX exemptions. Should I disclose this inheritance, and if so, can I claim this under my TX exemptions, if needed? I have no other real estate ownership. Parent’s home is in LA.
You have to disclose all of your assets, regardless of where they are. Your attorney can help you with the exemption planning. He/she will have to become familiar with the exemptions Texas allows.
Be completely open and honest with your attorney. This is a dangerous situation, where you could lose your interest in the house if you’re not careful.
Do you think that signing a Disclaimer from inheritance would help at this point?
I’m not going to give a legal opinion on the effect of disclaimers in Georgia. But your attorney should have that info. Again, you have to disclose all of this to your attorney. He/she can’t give competent legal advice without all of the facts. And once you file a Chapter 7, it’s too late to do any exemption planning.
On a similar note, if you own an insurance policy on someone who is not a dependent or a spouse, are you able to change the beneficiary while you are in a Chapter 13?
If a debtor owns the policy and is the beneficiary of the policy at the time of filing, the bankruptcy trustee will likely argue that the policy is property of the estate, and only the trustee can change the beneficiary. This may depend on local practice; I haven’t had it come up. Your attorney would be the best source of information.
My dad sister and I never opened a succession on my mother when she passed away 7 yrs ago. We are considering filing chapter 7 but they would take part of my dads house which I feel he worked for that I didn’t! I owe him money and I been wanting to turn my share over to him! If I do an act of donation in Louisiana could the courts come back on me?
That’s a question for your attorney. Don’t dispose of ANYTHING until you talk with him or her. Giving something away (or paying back money you owe) before filing bankruptcy is dangerous. Your attorney can tell you if it would be better to file before or after giving anything away. The timing is critical, and doing it improperly may put your assets at risk.
Bret, I filed chap 7 And 8 months later my mother passed leaving me 1/3 interest in her property. The catch is they filed a life estate deed and settlement lawyer is saying that it’s not considered inheritance and I may have to forfeit even after the 180 day window. I was never made aware of the life estate deed and did not sign anything to that effect. Curious your thoughts?
You need to contact your bankruptcy attorney immediately to ask for advice.
I’m thinking that you had an interest in the property before you filed your bankruptcy, and it was never disclosed. Your mother gave you a 1/3 interest in the property and reserved a life estate for herself. At the time of filing, you had a remainder interest in the property, which should have been listed in your bankruptcy as an asset. Since it wasn’t disclosed, it remains property of your bankruptcy estate, and the 180-day rule doesn’t come into play.
This is just a guess, and should not be taken as legal advice, because I don’t know all of the facts regarding your situation. Again, you need to speak with your bankruptcy attorney asap to see if it would be necessary to reopen your case to disclose and exempt the asset.
My mom was under chapter 13 bankruptcy then had passed away a few months afterwards, she did not have a will but her house is the house ive been living in for 20 years, is there someway to save my house,
Probably. Talk to your mother’s bankruptcy attorney to see if it would benefit you to continue her C13 payments (bankruptcy cases can continue even after the death of the debtor.) If the case has already been dismissed or closed, speak to a local bankruptcy attorney. Depending on who owns the house today, it’s likely you can save it. Good luck!
My husband was diagnosed with Stage 4 cancer in Dec. 2016 and we filed for Chapter 7 Bankruptcy in Feb. 2017 due to his being unable to work. All of our debts were credit card debt. We appeared before the court in May 2017 and it was discharged in early June 2017. He passed away at the end of June 2017. It was unexpected, even though he had cancer. We have two small children and live in KY. I received a $100,000 inheritance from his life insurance. Should I report this to our attorney? Will they try to keep some of this money? Thank you for your time.
I’m very sorry for your loss. You absolutely SHOULD let your attorney know. Depending on what exemptions are available, you may be able to keep all of the life insurance proceeds. But disclosure is the first step. Hiding assets is never a good idea. Good luck.
Our attorney filed Chapter 7 on January 31, 2017. The discharge date was mid-June. My mother-in-law just passed away on September 8, 2017. Since her death is more than 6 months after the filing date, will the trustee use any of the inheritance to pay debtors?
Nope. The 180-day window was shut before you were entitled to anything from her estate. You may want to contact your attorney to get his/her opinion, but on these facts, I don’t see how the trustee would get involved.
Thank you!
My mother died in a car accident in January 2017. I filed for Chapter 7 on 9/11/2017. I have not received any inheritance from my Mom’s will because her estate is being sued by the driver of the other car. I don’t know when or if I will receive any money. Does the 180 days start from 9/11/2017-the date I filed Ch.7? Thank you
I’m very sorry for your loss.
The 180 days starts from the date the bankruptcy was filed. So if anyone dies before 3/10/18, anything you receive belongs to your bankruptcy estate.
But in this case, the death occurred before you filed. Even if you didn’t know the value, your possible interest in your mother’s estate should have been listed with your other assets. Not disclosing an asset is a very bad idea in bankruptcy. Your attorney can give you more advice, but you need to let him/her know about this inadvertent nondisclosure asap.
I will do that. Will I get in trouble? I did not mean to do this wrong. Thank you for your help.
If you disclose the mistake before the trustee catches it, I would be surprised if you would get into any trouble. Bankruptcy courts deal harshly with people trying to cheat the system, but judges understand the difference between fraud and an innocent mistake.
Thank you for this information. If you are proposing a 100% payback Chapter 13 to the courts, can you request that any inheritance not be included to the trustee if it shall happen during the 5 year plan IN the proposed agreement to the court?
You can request anything, but the trustee may object, arguing that you could pay the plan off faster if the inheritance were brought in. This will depend on local practice, so your attorney will be able to explain if that’s a sound plan in your district.
Thx for this opportunity. My sister died 7 years ago, I filed for chapter 13 4.5 years ago. My inheritance will soon come in the amount of $20k. With only 6 months left, do I have to relinquish the inheritance? My lawyer is not good in returning calls:(
Maybe. I’m sorry for your loss, but the right to the inheritance existed before you filed your Chapter 13, and should have been disclosed in your original paperwork. Keep contacting your attorney, because he/she may be able to amend and exempt some of the inheritance. If you can’t get anywhere, contact a local bankruptcy attorney and explain your situation. NACBA has a good attorney finder. Good luck.
Hi! quick question
my wife and I have been considering bank chapt 7
i told my wife im pretty sure the trustee asks if you will get any sort of inheritance at the 341 meeting.
she freaked out and called her dad
because he is well off and has money” she asked him if there is a will or anything to change it out of her name til after its over
he said he dies is leaving 50 k of a life insurance if he dies “he is in good health and dont know when he will die” could be years..
i told her she cant tell her dad to do that cause its illegal im sure
she then called her dad back and said dont change anything…
but…he is the type of guy that does whatever he wants regardless of what we say and if we say dont do it.
What happens if we go to the meeting of creditors and she is asked if she is the benficiary of any life insurance proceeds?
if she says yes, does she need to show proof of the policy to the trustee
“cause I can guarantee her dad will not give her that info” and if he changed it will it look weird and can they listen back to the call and get my wife in trouble and think that she put him up to it…
?
also Iw as told by someone else I was told if my wife isnt the policy holder and just beneficiary we dont have to list it in the petition or somethin, or is that wrong?
but im worried about the trustee asking at the meeting
Those are all questions for your attorney before you file. In general, people can change their wills or life insurance beneficiaries any time before they die. But once they die and a debtor in bankruptcy is entitled to money, the money will go to the bankruptcy trustee. The debtor can’t retroactively change the will, direct where the money goes, or disclaim the inheritance. This is a serious issue that needs to be discussed with your attorney before you file.
what im saying though is if she says at the 341 metting that she is a benficiary do they need to see documents, because her dad is the type of person that wont give information and my question is what if he changed it before bankruptcy on his own, would that look weird to them? She already told her dad dont change anything but he does whatever he wants and shes concerned they could listen back to call etc. because she said change it but then she realized she cant do that and told him not to.. She doesnt want to get in trouble so we just wanna make sure we are doing everthing legal.
Again, that’s something to discuss with your attorney BEFORE you file. Every trustee is different, so your attorney will know what to expect when it comes to document production.
CHAPTER 7 OR CHAPTER 13 IS BEST?
They are both useful in different ways. Your attorney can tell you what works best in your individual situation. NACBA has a good attorney finder.
will i lose my car in chapter 7
Not usually. Your attorney can give you better information regarding your specific issue. It depends on how much equity you have in the car and what exemptions are available. NACBA has a good attorney finder. Good luck!
Hello, I filed for bankruptcy on June 21, 2017. The bankruptcy was discharged on September 25, 2017. My ex-husband passed away suddenly and unexpectedly on January 28, 2018. I remained his beneficiary on a 50K life insurance policy (we have 4 children together) as well as his retirement. By my calculations there are 222 days between the date I filed and the date he passed. Am I correct that I am in the clear, or should I still notify the trustee and my attorney to be on the safe side?
If those dates are accurate, you *should* be in the clear, but it’s always a good idea to check with your bankruptcy attorney.
My parents died 9 days apart 2 years ago case been in probate with no foreseeable end in site due to current lawsuit filed between my one brother and my other brother who is executor how does that work if I file bankruptcy
The possible inheritance will be property of your bankruptcy estate, so make sure to let your attorney know about it. He/she can give you advice, but in general, you would have to disclose and exempt it if you wanted to retain the right to receive anything from your parents’ estates. Good luck.
Hello. My husband passed away last May. He was involved in a medical device lawsuit, and now I have been listed on behalf of him (as well as our children)I had to open an Estate in the situation of a settlement/award. Its still in litigation and will likely be for several more years. I am looking into filing Chapter 7, but I’m not sure of the implications of the estate if I do. The estate has no assets, it does have several creditors that have filed for payments. I live in Fl. Any advice or direction is appreciated.
I’m sorry for your loss. You need to speak with your local bankruptcy attorney about this; he/she will be able to give you better advice after talking with you. NACBA has a good attorney finder.
The lawsuit will have to be disclosed if you file C7, but the trustee might abandon any interest in it if it looks like you’ll get less than the exemption amount. Good luck.
My husband and I are in a chapter 7 bankruptcy as of 7/17.
My husband’s mum has suddenly fallen ill and is expected to pass away in the next couple of weeks. We just learned that she recently modified her will to leave 40% of her estate to our minor children (aged 13 and 12). They will inherit about $300,000 – $400,000. Will that money somehow be clawed back even though she left it to her grandchildren and not us? We obviously don’t want that money included in our bankruptcy – she chose to change her will, we didn’t request it.
Also, we recently had our first meeting of creditors and the trustee hired attorneys to look into our 401k dispersal we took in 2016 in an attempt to keep paying our debts whilst we looked for new jobs (about $400,000 ($200,000 after taxes)). We know we did nothing untoward in that, but just mention it in case it complicates the matter! Thanks for your advice!
Your first step is to talk to your bankruptcy attorney. If you don’t have one, NACBA has a good attorney finder.
In general, only funds that are received by the debtors are available for administration. If the debtors’ children receive something, it’s not typically part of the bankruptcy estate. There are always exceptions, which is why it’s important to have an attorney representing your interests. Bankruptcy is a minefield, where mistakes can lead to loss of assets or loss of the discharge. Good luck.
My father passed away ten days ago. He was unmarried. My only sibling did not speak to my father for 5 years prior to his death. He had no will and listed me as a beneficiary on his IRA account. I understand that the assets without listed beneficiaries are subject to probate or equal distribution. There is about 100k in equity in his home and about 25k in cash and insurance distributions.
My sister has been approaching bankruptcy and informed me that her attorney advised her to “homestead” in my fathers vacant house to protect the asset from her bankruptcy trustee. I haven’t even had time to process my Dad’s death and now I am feeling like I need to protect his estate so that I am not adversely affected.
If my sister legally homesteads in the house, 80 days from now, can the trustee take all of the remaining assets, including the account which I am listed as the sole beneficiary? Or will they only be able to take half of the non-homestead assets? Should I file paperwork now to prevent this homestead? My fear is that if she exempts the equity in the home, they will be able to go after the rest of his estate including my dads retirement. Please help. I contacted 3 probate attorneys and none of them wanted to take the case due to it’s complexity and their unfamiliarity with bankruptcy law.
It depends on your state’s law. In your sister’s bankruptcy, everything she has a right to becomes part of her bankruptcy estate. In effect, the bankruptcy trustee steps into her shoes and has the same rights to that property, no more and no less. You should contact a local attorney familiar with both bankruptcy and probate laws in your state. Contact a bankruptcy lawyer first, and that attorney will likely partner with a probate attorney. NACBA has a good attorney finder. Good luck!
My mother died 11 days short of the 180 days. The Trustee said that I have to send the letters to all the creditors, which I understand.Then I get a letter in the mail that our Trustee has an attorney and we are responsible for his bill. In this letter was a list of his charges. This just seems wrong. Why does the Trustee need an attorney? We have to pay the bill, but he won’t even talk to us.
I’m sorry for your loss. The trustee can’t give you legal advice, so listen to your attorney, not the person who is trying to take your inheritance. If you didn’t have an attorney when you filed (this is one of the reasons that’s a bad idea), find a local attorney to help you with this. NACBA has a good attorney finder.
Your attorney might be able to exempt all or part of your inheritance. Don’t send any letters to your creditors unless/until your own attorney tells you to. The trustee will reopen the case, and let the creditors know they should file a Proof of Claim. The trustee hires a lawyer (usually someone in his/her own firm) to administer the asset. Good luck!
Would you recommend I file for bankruptcy asap? I’m a middle aged single guy with no offspring who has a younger brother (he’s married with kids) and we are both (the will hasn’t been finalized yet – it’s in the draft process) going to inherit my father’s house after he passes. Although he’s in his early 80s, my Dad is still is spry and relatively healthy. Personally, my finances are awful and have been for some time – I have over 40K in credit card debt accrued through multiple cards while my little brother, on the other hand, is thankfully doing well for himself. In addition, I’ve been in and out of jobs over the years (that’s another story which I’m hoping resolves itself – my luck with securing actual job interviews has been lousy). My family (father and brother) are strongly recommending that I file for bankruptcy asap as doing so will help protect my Dad’s estate upon his passing. Is this true? I have never filed for bankruptcy and find it a little unnerving to have this possibly be on my record. What would you recommend? I want what’s best for everyone. I don’t know if this additional detail helps but I live in NY state; my little brother has his permanent residence in nearby CT. And my Dad’s house is in NY state.
I wouldn’t recommend anything without talking with you. What might be a good idea in Wisconsin might be a horrible mistake in New York. You should talk with a local attorney to learn your options. NACBA has a good attorney finder. Filing bankruptcy now might be a good idea, but only an attorney can give you good advice about that. Good luck!
My husband filed chapter 11 for business and himself in August 2020. He died 12/25/2020. No longer pan had been confirmed. His lawyer agreed to appointment of trustee just after his death. While some assets are exempt our home a farm and a CD we had together. All other assets are in the bankruptcy estate..Two properties are being sought by trustee as fraudulent conveyances since they were made properties of the entireties in Jan 2020.
The cases were converted after the death and of my spouse to chapter 7. He died intestate, in Tn widow is entitled to years support car, and 1/3 of estate.can I make a claim against the bankruptcy for widows portion.
I’m very sorry for your loss. You’ve asked a good question, but it’s also fact- and state-specific. I’m not licensed to practice law in Tennessee, but if the trustee is asserting a claim against you personally, you should hire a local attorney asap. NACBA has a good attorney finder. Good luck, and take care.
Hello,
I filed Chapter 7 back in July. My dad is very sick and he may not make it until January when the 180 days. We added a codicil to the will removing me from the will and giving my brother everything. Is this enough to protect the inheritance in case my father passes before the 6 months?
Maybe, but you need to discuss this with your attorney asap. It will all depend on state law. Do-it-yourself estate planning (or exemption planning) is usually a recipe for disaster. Make sure your attorney sees the will to ensure that it was done correctly. I’m very sorry about your father. Take care.
I just file for bankruptcy chapter 7 I had my 341 meeting and it was conclude done ,my family ,my grandmother and my mother they both are still alive they are planning and want to do transfer death deed and put my name in the home deed the owner is my grandmother my mother will be the beneficiary and me the third person in case something God forgive happen to my mother,
will that be ok or the trustee can interfere and if so if he’ll find out want to be prepared in case he decides to question me and try to set back my discharge for questions , or should I wait the 180 days ….please advise Tks my family didn’t know I file for bankruptcy
It really depends on where you live and what “third person” means. You should definitely talk to your bankruptcy attorney about this to see what precautions you can take to make sure you don’t lose any family assets, in case someone dies. Good Luck!
My mother passed away in Aug. 2021 due to COVID and left me and my 2 siblings a house and land. We are trying to sell both but title company red flagged because of my Chapter 13 over 2 years in. Any suggestions for me.
I’m sorry for your loss. My suggestion is that you contact your attorney asap. He/she can advise you better than some random person online.
Your interest in the real estate may be property of the bankruptcy estate, which is why (I’m assuming) the title company flagged it. If it is, your attorney can clear everything up with the C13 trustee. If not, your attorney can explain to the title company why you should be able to close on a sale. Good luck!
I filled chapter 13 in January 2022 and I have received my confirmation. My sister is selling a house and wants to gift me 50 k when she sells it this fall. Would I be able to keep it or will this gift from my sister go to the Bankruptcy court.
Congratulations on getting your plan confirmed! Definitely talk to your attorney about the proposed gift. In some jurisdictions, the trustee would argue it is property of the bankruptcy estate, and move that your payments be increased. If that’s the case where you live, you could ask your sister to delay the gift until after your case is over. But talk to your attorney. From experience, I can tell you it’s MUCH easier (for the attorney) and less expensive (for you) to avoid a problem than to fix one. Good luck!
Thank you for your response. I contacted my attorney and he said it is a gift and would not be considered income. Then further stated I wouldn’t need to tell the trustee about it. I hope I wasn’t advised incorrectly But I’m going to double check prior to my sister wanting to give me a one time monetary gift to make certain. Thank you
If I’m the sole beneficiary of a trust and the trust fund is in control of non-performing trustees (they have yet to account or distribute the fund) and I’m entitled to have access to the fund, especially for the payment of debts, if I file bankruptcy (chapter 7) would the bankruptcy trustee perform sequestration of my beneficial assets in order to apply the same to my outstanding debts?
As with most legal questions, the answer is “it depends.” How much is in the trust? Who is the trustee? Does the trust have a spendthrift clause, and are spendthrift clauses valid in your district?
Generally, your interest in the trust would become property of the bankruptcy estate upon filing. If you can’t exempt that interest, the bankruptcy trustee would liquidate it and pay your creditors. But that’s just basic info. Your attorney can give you an analysis of your specific case once he/she has all the info. If you don’t have an attorney yet, NACBA has a good attorney finder. Good luck!
Is there any way to hold on to bits of inheritance if you are 6 months from the end of your Chapter 13? Was told would have to pay 22k to creditors and then that would be the end of the Ch 13. Received half house and farmland (along with sister), 2 vehicles, and some cash. Can anything be exempt?
It all depends on where you filed and what exemptions are available. In some cases, inheritances received after 180 days from filing are not required to be turned over for the benefit of creditors. Your attorney will have better information about your case and be able to give you legal advice regarding your individual situation. Make sure to let him/her know asap.
Thank you for the reply! Filed in North Carolina. From what I can see online, the 180 day rule doesn’t seem to really apply for Chapter 13. Am I wrong? I am just trying to figure something out because this is literally the very last thing to be inherited. There is no one else to leave anything. And to lose so much of it… is there any way to protect it?
Don’t rely on the internet for legal advice (even this blog!) Ask your attorney. Only he/she can give you reliable legal advice. The 180-day rule applies to all bankruptcy cases. The question is whether an inheritance past 180 days requires turnover to a C13 trustee. Some jurisdictions say yes, some say no. I don’t know what the rule is in North Carolina, but your attorney does. Your attorney will also know if you have exemptions available to protect any of your inheritance and whether or not it’s necessary to exempt it. If you filed without an attorney (never a good idea), NACBA has a good attorney finder. Good luck!
I know in Arizona a Beneficiary Deed is effective only upon death. If a ch. 7 is filed, and living owner does NOT pass within 180 days post-petition, is the property “safe”? OR Does the filing of the BK automatically attach the asset and deem non-exempt? A sibling needs to file but is listed on the Bene Deed on my mom’s prop.
That’s a good question, but it’s state-specific. *If* the deed is only effective upon death, the property would not become property of the C7 bankruptcy estate unless Mom dies within 180 days of filing. But if Arizona law says that having your name on the deed is a present property interest, and not just an expectation, the value of that interest would become property of the estate and would have to either be liquidated or exempted. Your sibling needs to talk with his/her attorney before filing. NACBA has a good attorney finder. Good luck!
This is in California. My grandmother was under a conservatorship from 2014 until September 2022. The conservatorship was established because one of my uncles forged a power of attorney and a Trust [naming himself Trustee and giving himself 70% with his other 3 siblings sharing the other 30%]. She had advanced dementia and suffered from severe visual and auditory hallucinations. The Probate Court threw out the Trust in 2020 and ordered my uncle to return real property he had taken under his name as the Trustee. There was a trial scheduled to establish damages he owed to the Conservatorship Estate while my grandmother was still alive but, due to various circumstances leading to continuances, she died before trial could commence. They switched it from a conservatorship to a probate and rescheduled the trial but, right before trial, he filed for Chapter 13 bankruptcy – we think this is to delay trial.
He is technically a 25% intestate heir to my grandmother’s probate estate. The attorney representing the personal representative that was going to trial said damages intended to be shown at trial were going to be subtracted from his intestate share [Estate only has real property, no cash]. But now that he has filed for bankruptcy, they are saying the trial will be delayed until the bankruptcy is resolved. Will this impact the rest of the probate administration and the other 3 beneficiaries?
That’s a CA-specific question. My guess is you’re right and this is an attempt to delay. The estate *could* talk to a local bankruptcy attorney to see if filing a Motion for Relief From the Automatic Stay to proceed with the state court matter would make sense in this case. Sounds like a terrible situation, I’m sorry for your family. Take care.
I’m in need of filing bankruptcy. I have approximately $160k in debt. My mother passed away 8 years ago and left her home to myself and 3 sisters. As I took care of her for the last five years of her life she stipulated in her will that I may stay in her home rent free for as long as I wish. The deed to the house remains in my mother’s name. Is the trustee likely to look into the ownership of my residence, discover it is in the name of my deceased mother and then take a look at the will? The property is worth about $500k. Would we be forced to sell in Chapter 7 and 13? I live in Denver Colorado where there is a $350k exemption for property ownership.
Those are all good questions, but they need to be answered by a local attorney. He/she will get more financial information from you and can give you competent legal advice. I wouldn’t move any of your assets without first talking to your lawyer. NACBA has a good attorney finder. Good luck!
My father passed away three years ago, I received a “notice of filing of final report and account by trustee” letter from the clerk of a Texas bankruptcy court on behalf of a debtor, I believe this person owed my Dad a substantial amount of money, I’m confused about bankruptcy court first of all, and second, what do I need to do? Can I claim this money that was owed to my Dad or with his death, does this person just not have to pay what was owed?
I’m not sure. The notice of final report is usually done at the end of a Chapter 13 case or Chapter 7 case with assets. If your father was entitled to anything, the final report would say how much he received. But this is all fact-specific. Talk to a local attorney who represents creditors in bankruptcy. (If your father got this notice, he probably also got the notice when the bankruptcy was originally filed, and may have hired an attorney at that time.) Good luck!
My grandfather passed away in 2015 and in his Will it stated he would split his amount from when his house sells to his 3 three children or per stripes meaning their children. My mother passed in 2018 and my grandfathers home sold this year. I was told they had to wait 9 years for everything to close because he owened the house with my grandmother. She recently passed this year 2023. I maybe receiving a disturbition of funds and I recently filed chapter 13 in may. I am unsure what i should do if i do get this money because i need this for my family and my daughters future.
That’s definitely something you need to talk to your bankruptcy attorney about. Depending on the specific facts, the funds may have been an asset of your bankruptcy estate when you filed your case. You may have to simply amend some papers that have been filed or dismiss your Chapter 13 case. Your attorney will be able to explain all of your options. Good luck!
My mom died in 2019 and dad in January of 2021. The monies have not been distributed at this time; they should be next week. I am filing bankruptcy – Ch7. We have been holding off until after distribution. The 180 days does not apply, he died almost 3 years ago. I wouldn’t be in the spot I’m in if the money came sooner. I do I need to file an exemption?
Because you haven’t filed bankruptcy yet, the 180-day rule doesn’t apply. But any inheritance to which you are entitled will be an asset of your bankruptcy estate, so it must be exempted if you want to retain it. Be sure to explain this all to your attorney BEFORE filing, so that you don’t lose the funds to the bankruptcy trustee. Good luck.
Hi Bret,
So my Chapt 7 was filed in Eastern Dist. State of WA. on Jan 12, 2023. My mom passed away before the 180 days were up. I notified the trustee myself because I couldn’t afford to pay a bankruptcy attorney again and he reopened the bankruptcy. I filed the schedule amendments to include the wildcard exemption. The trustee said he would mail out the Notice to Creditors to all of my creditors as listed on the initial documents. The time to file a Creditor’s claim will end on 10/27/23. The trustee told me he can run a second notice to crditors one more time. So far no creditors have filed, but still a month left. And another 3 months if Trustee in his discretion chooses to run it again. My dischargeable debts were only about $20,000, but I had $147,000 in student loans that will eat up all of my inheritance. Is there anything I can do? Should I be worried that the trustee will somehow take advantage of me since I don’t have an attorney (I did have one for the initial filing of paperwork). I’m assuming its pretty much just a waiting game at this point. Also, in your experience, do federal student loans usually file claims? Thank you.
I’m sorry for your loss.
If no creditors file claims, the trustee will usually send another notice. Trustees only get paid a commission on the funds they distribute to creditors.
The Department of Education files claims for student loans in Chapter 13, but I don’t file many asset Chapter 7 cases to have an idea if they file claims in those situations. As is my suggestion to anyone filing bankruptcy, it’s best to have an attorney. He/she can ensure that your exemptions are maxed out, so that you can keep as much of the inheritance as possible, whether or not claims get filed. Good luck.
Brett, is it possible to convert my Chapt 7 to a Chapt 13 and thereby get on a payment plan instead of having to pay all debts in total outright? I am now working since Sept 1st at a $70,000 salaried position after getting laid off last November 2022. From what I’m reading online, I am eligible to convert to 13 even after the April discharge since my Chapt 7 was reopened in July due to unexpected inheritance. Its an interesting issue because as I said my dischargeable debt was on $20k, but my students loans are $147k. If I convert to 13, I can get on a payment plan so my entire inheritance is not taken. What do you think?
Courts disagree whether a Chapter 7 case can be converted to Chapter 13 after the Chapter 7 discharge has been granted, so you should definitely consult a local attorney before doing this. There are a lot of moving parts regarding assets, income, exemptions, and timing. Those considerations are in addition to the question whether your court would even allow a conversion post-discharge. Absolutely something a local attorney would need to research before giving advice.
Bret,
I have commented before re your advice on my situation: Basically, I filed Ch 7 in Jan 2023, $20k in debts were discharged in April and my mother died before 180 days were up. While my dischargeable debts were low, my non-dischargeable student loan debt is $125k and will take most of my inheritance. Therefore, I asked about converting my 7 to a 13 to protect my inheritance from student loan debt in the form of a repayment plan. You recommended I talk with a local attorney, but none are interested in taking the matter. I am not sure why unless it is because allowable attorney fees don’t make it worth it? Status of my case is that as of 10/26, the 90 days is up for creditors to file claims (so far none have been filed) I was told that trustee has discretion to send out a 2nd NTC. Do you know how long this second NTC period is before all creditor’s claims are barred? Is there a way for me to consult with you for a fee of course to discuss possible research into this matter and not legal representation for my specific matter? I realize you don’t practice in WA state, but not sure how to move forward. Also, the Trustee told me in August he would mail my $15k wildcard exemption, but two months ago when I called him, he said he is having trouble finding out who to talk to re financial account holding $100k of my inheritance. I am unrepresented. Thoughts? Thanks again. You can msg me privately for a private consultation if you think you can help me.
I’m sorry, I’m not licensed to practice law outside of Wisconsin. The only advice I can give is speak with a local attorney. If your former attorney won’t help and you’ve searched NACBA.org with no luck, try the WA state bar. Even though bankruptcy is based on federal statutes, it’s very much influenced by local rules. Good luck!
Bret, I filed chapter 13 on 7/18/23. I have $111,500 in debt (credit) no student loans. Creditor’s claimed $87,000 of that debt. I had a confirmation hearing in October, but I denied the plan due to inflated monthly payment. I am submitting an amendment and my next confirmation hearing is scheduled for December.
I was just notified that I am receiving an inheritance from an aunt that passed away in October 2022 in the amount of $150,000.
My question is should I continue on with chapter 13 given my inheritance or would it make more sense to voluntarily withdraw my filing and manage creditor settlements on my own?
In your opinion, what would be the pros and cons of continuing on with filing and dismissing my case.
That’s a great question for your attorney. He/she can lay out all of the options you have at this point, whether it’s dismissing your case, amending your plan, or converting to Chapter 7. I don’t have enough information to give an opinion on your specific case (and I don’t give legal advice online, anyway.) Your attorney may have other ideas, too. Perhaps you dismiss and file later or file something pursuant to state law. Good luck!