How Will an Inheritance Affect My Bankruptcy Case?
When you make the decision to file for consumer bankruptcy, it can be confusing to understand what property is exempt and how your current assets will be handled in your bankruptcy case. There are also important distinctions between Chapter 7 bankruptcy and Chapter 13 bankruptcy, since the former is a “liquidation” bankruptcy in which all non-exempt assets are liquidated in order to repay creditors. One issue that can be especially unclear is how inheritances are handled in a bankruptcy case. For example, if you inherit property either before you file for bankruptcy or after you file your bankruptcy petition, will you be able to keep that property?
The answer to this question can vary depending upon a number of different factors. We want to address some of those key factors for you below.
Is the Inheritance Exempt?
One of the first considerations is whether an inheritance would be exempt property under Illinois law. In Oak Park, debtors who are filing for bankruptcy are required to use Illinois exemptions. Exempt property is property that cannot be liquidated as part of your bankruptcy case—this is property that you are allowed to keep. Any non-exempt property, however, may be liquidated. There are numerous exemptions, such as up to $2,400 in equity for one motor vehicle, a wildcard exemption of up to $4,000, recoveries of up to $15,000 from personal injury lawsuits, family photographs, certain retirement accounts, and up to $1,500 in tools or books of your trade. There are many other exemptions that your bankruptcy lawyer can discuss with you.
If your inheritance falls into one of the categories of exempt property, you may not need to investigate further whether you will be able to keep the property. However, if you are inheriting a type of property that is not exempt (including money if you are already planning to use the wildcard exemption, for example), then the date of your inheritance will become important.
The 180-Day Rule
If the inheritance does not fall into one of the “exempt” categories under Illinois law, the question of whether you can keep the property may depend upon the date of the inheritance. If you inherit the property within 180 days after you have filed for bankruptcy, then that property will become the property of the bankruptcy estate. Accordingly, if you receive your inheritance within 180 days from the date that you filed for bankruptcy, you may not be able to keep the property if you are filing for Chapter 7 bankruptcy. However, if you are filing for Chapter 13 bankruptcy, inheriting the property within 180 days could simply mean that your repayment plan changes.
When you inherit property within 180 days of the date you filed for bankruptcy, you must inform the court. Depending upon the type of property, you will need to amend one of the “schedules” you submitted to the court. This is true whether or not the property is exempt. For instance, if you inherit real property, you will be required to amend Schedule A. If you inherit money or another type of property, you will be required to amend Schedule B. Even if the property is exempt, you must still amend Schedule C.
The date of the inheritance is not the date that you actually get the property, but rather the date that it became your inheritance. For example, if a relative passes away and you inherit property on November 1, but you do not actually receive the property in your possession until February 1 of the following year, the date of the inheritance is November 1.
Seek Advice from a Bankruptcy Lawyer in Oak Park
Consumer bankruptcy is extremely complicated, but an Oak Park bankruptcy lawyer can help. Contact the Emerson Law Firm today to speak with an advocate at our firm.
See Related Blog Posts:
What is Credit Counseling for Personal Bankruptcy?
Mortgage Tax Debt and Bankruptcy
The answer to this question can vary depending upon a number of different factors. We want to address some of those key factors for you below.
Is the Inheritance Exempt?
One of the first considerations is whether an inheritance would be exempt property under Illinois law. In Oak Park, debtors who are filing for bankruptcy are required to use Illinois exemptions. Exempt property is property that cannot be liquidated as part of your bankruptcy case—this is property that you are allowed to keep. Any non-exempt property, however, may be liquidated. There are numerous exemptions, such as up to $2,400 in equity for one motor vehicle, a wildcard exemption of up to $4,000, recoveries of up to $15,000 from personal injury lawsuits, family photographs, certain retirement accounts, and up to $1,500 in tools or books of your trade. There are many other exemptions that your bankruptcy lawyer can discuss with you.
If your inheritance falls into one of the categories of exempt property, you may not need to investigate further whether you will be able to keep the property. However, if you are inheriting a type of property that is not exempt (including money if you are already planning to use the wildcard exemption, for example), then the date of your inheritance will become important.
The 180-Day Rule
If the inheritance does not fall into one of the “exempt” categories under Illinois law, the question of whether you can keep the property may depend upon the date of the inheritance. If you inherit the property within 180 days after you have filed for bankruptcy, then that property will become the property of the bankruptcy estate. Accordingly, if you receive your inheritance within 180 days from the date that you filed for bankruptcy, you may not be able to keep the property if you are filing for Chapter 7 bankruptcy. However, if you are filing for Chapter 13 bankruptcy, inheriting the property within 180 days could simply mean that your repayment plan changes.
When you inherit property within 180 days of the date you filed for bankruptcy, you must inform the court. Depending upon the type of property, you will need to amend one of the “schedules” you submitted to the court. This is true whether or not the property is exempt. For instance, if you inherit real property, you will be required to amend Schedule A. If you inherit money or another type of property, you will be required to amend Schedule B. Even if the property is exempt, you must still amend Schedule C.
The date of the inheritance is not the date that you actually get the property, but rather the date that it became your inheritance. For example, if a relative passes away and you inherit property on November 1, but you do not actually receive the property in your possession until February 1 of the following year, the date of the inheritance is November 1.
Seek Advice from a Bankruptcy Lawyer in Oak Park
Consumer bankruptcy is extremely complicated, but an Oak Park bankruptcy lawyer can help. Contact the Emerson Law Firm today to speak with an advocate at our firm.
See Related Blog Posts:
What is Credit Counseling for Personal Bankruptcy?
Mortgage Tax Debt and Bankruptcy
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