When you file bankruptcy, filers submit a budget and detailed explanations of all income and expenses. Everything must be very detailed, exact and thorough. In some cases, the financial details can change drastically after the bankruptcy is underway. For instance, a loved one could pass away and leave an inheritance behind. If you are in the middle of filing for bankruptcy when you are designated as a beneficiary, will you lose your inheritance?
When filing for Chapter 7 bankruptcy, your income is taken into consideration. You must qualify under the income portion of the Chapter 7 bankruptcy. You have to consider your assets. If you have too many, you may not qualify. An inheritance would definitely be counted as an asset. It will require careful consideration and handling.
If you suspect you may be the recipient of an inheritance in the near future, advise your bankruptcy attorney when you are filing. Also notify your attorney/the bankruptcy court if you are the beneficiary of a trust that is being administered. If you suspect that you may someday receive an inheritance, but you don’t know when, you don’t need to worry about listing it in your bankruptcy. The court isn’t interested in speculative information regarding money that could be inherited in an unknown future.
If, on the other hand, you know that you are receiving an inheritance, you must disclose the information in your bankruptcy paperwork. Whether or not you will be able to protect your inheritance from the bankruptcy process would depend upon specific state laws regarding assets during bankruptcy. If you have not yet filed, and you are aware of an upcoming inheritance, you should probably delay filing for bankruptcy until after you have received your inheritance. If you receive your inheritance and spend it (on you and/or your household) before filing, it won’t be included in the bankruptcy calculations because it’s gone. This is only appropriate for small inheritances. For instance, if you were in receipt of hundreds of thousands of dollars, it would be difficult to spend outright and would be a massive waste if you managed to do so. We’re simply talking about cases in which you received some money, but not enough to pay off creditors.
If you still have questions about receiving an inheritance and how it could change your bankruptcy filing, contact the experienced southern California bankruptcy attorneys at Westgate Law today.