Effects of Bankruptcy on Your Inheritance
If you are filing for bankruptcy, certainly there are hundreds of things going on in your head. One of them is inheritance. What if you receive an inheritance right after you file for bankruptcy? Will chapter 7 and chapter 13 bankruptcy have different effects on your inheritance? Will the debtor or the court take away your inheritance too to pay off your debts? Our experienced Pittsburgh bankruptcy lawyer is here to explain this all to you.180 Days Rule: Chapter 7 Bankruptcy and Inheritance
Unfortunately, your fear is valid. During chapter 7 bankruptcy, if you receive an inheritance, it might get taken away from you to pay off the debts. However, if this will happen or not will depend on when you are receiving your inheritance and if it is considered to be exempt property.
If you are receiving the inheritance within 180 days of filing bankruptcy, it will be added to the bankruptcy estate. This refers to all the property that the trustee can sell off to your debts. However, if you are already listing this as your exempt property, the trustee won’t be able to sell it off.
If 180 days have passed and then you have received the inheritance, then you will get more protection for your property. It will not be considered as your bankruptcy estate. Hence, the trustee won’t be able to liquidate them in order to pay your debts.How Your Inheritance Will Affect Your Chapter 13 Repayment Plan
When it comes to chapter 13 and inheritance, rules are a bit complicated.
When you are filing for Chapter 13 bankruptcy, you are getting three to five years of repayment plan to pay off your debts. The amount that you will be paying will be calculated on the basis of your disposable income and the total value of your non-exempt property. This value should be equal to or more than the amount that you would have paid to your creditors if you had filed chapter 7 bankruptcy.
This is the reason why your repayment plan has to reflect your total non-exempt inheritance. Essentially, when you are receiving an inheritance, it will raise the amount you will have to pay to your creditors.
There is also another thing that you should consider. The value of your inheritance might not be covered by the exemption. Hence, the value that is beyond the limit of exemption will be considered as non-exempt property and subjected to be distributed for repaying your creditors.Do Exemptions Cover Inheritance?
The limit of the exemption of your property depends on what type of inheritance you are opting for. In Pennsylvania, you will get an exemption for personal property, business and real property, and private retirement benefits. These types of inheritance will be protected by the state if you opt for exemptions.
Additionally, you can choose between state and federal exemptions that will allow you to protect the inheritance. Our Pittsburgh bankruptcy lawyer can explain this to you further.
For more details on inheritance and how bankruptcy can affect it, come to us at Pittsburgh Bankruptcy Law Group. We are here to assist you.