Sometimes receiving an inheritance is amazing. Sometimes it’s a blessing. Sometimes it can even be a downright lifesaver. But then there are times when you feel like it’s the last thing you want! Some who have finally turned to bankruptcy as a solution for their impossible financial situations will be completely distraught at the news that they have an unexpected inheritance.
For instance: You are divorced, receiving SSI and child support (fixed income), have an overwhelming amount of debt owed to a variety of creditors, and you suddenly have a relative pass away. They passed away without a will, but you are in line to inherit. You are left with their house. Can you be forced to go to probate for the house?
The answer is…that depends. You have every right to throw your hands up and walk away from the house if it’s a financial pothole for you. No one can make you sell the house in order to pay your creditors. That is, unless you are filing for bankruptcy. When you file for bankruptcy, a trustee is assigned to your case. The job of the trustee is to evaluate your unprotected assets, sell them and use the funds to pay your creditors. They actually receive a fee for paying your creditors. If there is any equity in the home you are in line to inherit, the bankruptcy trustee could feel it’s in the best interest of your bankruptcy case to sell it and use the proceeds. That would be their call to make.
The trustee may even completely understand that you’d like to avoid the probate process and not get involved, but they could want to on your behalf. They could just wait until the probate ends and then sell the house for you. The proceeds would be turned over to the bankruptcy trustee and then distributed to creditors. Throughout the entire process, you are protected from your creditors by the very fact that you filed.
If the house has enough equity to pay all your creditors in full, it may be worth it to deal with probate and pay them off. There could even be enough left over to leave you with some cash once all was said and done. If there’s not enough equity to take care of the debt you owe, then it shouldn’t stop you from filing for bankruptcy. It will simply be one more asset for the bankruptcy trustee to consider when going through your list of unprotected assets.
If you need assistance making this decision, contact the southern California bankruptcy attorneys at Westgate Law. We know decisions related to bankruptcy can be difficult and riddled with impossible questions and we can help you find the answers.