What Happens to an Inheritance in Chapter 7 Bankruptcy?
In both Chapter 7 bankruptcy and Chapter 13 bankruptcy cases, the debtor will be required to disclose information about all assets and income to determine eligibility for bankruptcy as well as to determine the course of the bankruptcy case. While assets are treated differently in Chapter 7 and Chapter 13 bankruptcy cases, receiving an inheritance can significantly affect both types of bankruptcy cases. Today, our Oak Park bankruptcy attorneys can explain in more detail how inheritances are handled in Chapter 7 bankruptcy cases.
Chapter 7 Bankruptcy and Inheritances
First, we want to discuss how inheritances will be treated in Chapter 7 bankruptcy cases. It will be extremely important to know when you become entitled to the inheritance, and whether that occurs before, during, or after your bankruptcy filing.
If you find out that you will be entitled to receive the inheritance before you actually file for Chapter 7 bankruptcy, you will need to determine whether the inheritance can be “exempt” under Illinois bankruptcy exemptions. If the inheritance is not exempt, then it is possible (and likely) that the bankruptcy trustee can take the inheritance.
If you find out that you will be entitled to receive the inheritance during your bankruptcy case, or within 180 days of filing for bankruptcy (we will explain that 180-day rule in more detail below), then the inheritance will become a part of your bankruptcy estate. You will still be able to use an exemption if one is available to exempt the inheritance and to keep it, but you will need to go through additional steps of amending your bankruptcy case.
If you become entitled to receive the inheritance more than 180 days after you file for bankruptcy, the inheritance will not be part of the bankruptcy estate. You can keep the inheritance regardless of whether it would be classified as exempt.
How the 180-Day Rule Works
We want to be clear about the timetable for the bankruptcy trustee being able to take the inheritance. In Chapter 7 cases, there is something known as the “180-day rule.” The rule works like this: if you become entitled to an inheritance within 180 days from the date you file for bankruptcy, then the inheritance will become part of the bankruptcy estate unless you can use an exemption. If the inheritance is significant, it is unlikely that one of the exemptions will allow you to keep all of it.
To be clear, the 180-day rule applies to the date you become entitled to the inheritance, and not to the date that you actually receive it. So, if you find out that you have been named as a beneficiary or heir in a will within 180 days of filing for bankruptcy, you cannot delay the date that you actually take possession of the inheritance in order to avoid the inheritance becoming part of the bankruptcy estate. The date on which you become entitled to receive the inheritance is usually the date of the deceased’s death.
Contact an Oak Park Bankruptcy Lawyer
If you are planning to file for bankruptcy or in the midst of a bankruptcy case and have questions about an inheritance, you should seek advice from an Oak Park bankruptcy attorney as soon as possible. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Am I a Good Candidate for Chapter 13 Bankruptcy?
Bankruptcy Surge More Likely to Occur in 2022
Chapter 7 Bankruptcy and Inheritances
First, we want to discuss how inheritances will be treated in Chapter 7 bankruptcy cases. It will be extremely important to know when you become entitled to the inheritance, and whether that occurs before, during, or after your bankruptcy filing.
If you find out that you will be entitled to receive the inheritance before you actually file for Chapter 7 bankruptcy, you will need to determine whether the inheritance can be “exempt” under Illinois bankruptcy exemptions. If the inheritance is not exempt, then it is possible (and likely) that the bankruptcy trustee can take the inheritance.
If you find out that you will be entitled to receive the inheritance during your bankruptcy case, or within 180 days of filing for bankruptcy (we will explain that 180-day rule in more detail below), then the inheritance will become a part of your bankruptcy estate. You will still be able to use an exemption if one is available to exempt the inheritance and to keep it, but you will need to go through additional steps of amending your bankruptcy case.
If you become entitled to receive the inheritance more than 180 days after you file for bankruptcy, the inheritance will not be part of the bankruptcy estate. You can keep the inheritance regardless of whether it would be classified as exempt.
How the 180-Day Rule Works
We want to be clear about the timetable for the bankruptcy trustee being able to take the inheritance. In Chapter 7 cases, there is something known as the “180-day rule.” The rule works like this: if you become entitled to an inheritance within 180 days from the date you file for bankruptcy, then the inheritance will become part of the bankruptcy estate unless you can use an exemption. If the inheritance is significant, it is unlikely that one of the exemptions will allow you to keep all of it.
To be clear, the 180-day rule applies to the date you become entitled to the inheritance, and not to the date that you actually receive it. So, if you find out that you have been named as a beneficiary or heir in a will within 180 days of filing for bankruptcy, you cannot delay the date that you actually take possession of the inheritance in order to avoid the inheritance becoming part of the bankruptcy estate. The date on which you become entitled to receive the inheritance is usually the date of the deceased’s death.
Contact an Oak Park Bankruptcy Lawyer
If you are planning to file for bankruptcy or in the midst of a bankruptcy case and have questions about an inheritance, you should seek advice from an Oak Park bankruptcy attorney as soon as possible. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Am I a Good Candidate for Chapter 13 Bankruptcy?
Bankruptcy Surge More Likely to Occur in 2022
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