Creditors are concerned with one thing, getting their money. If you have filed for bankruptcy, you are afforded protection from creditors and collection efforts through an automatic stay. During the bankruptcy process creditors cannot collect on the debt, unless otherwise outlined through a Chapter 13 bankruptcy plan. If you receive a Chapter 7 bankruptcy discharge, your debts have been eliminated and you are relieved of responsibility to pay those debts. However, when it comes to money you have inherited, you may have several questions. Will the inheritance I received prior to bankruptcy be taken away? What happens if I inherit money after I have filed for bankruptcy?
Inheriting Money Before Bankruptcy
Inheriting money before bankruptcy can complicate your ability to qualify for bankruptcy protection. If your income or assets are more than a specified amount in relation to your debt, you may be at risk of losing your assets to creditors. Texas is one of many states that provide exemptions of personal property from seizure during bankruptcy. Personal property up to $30,000 for an individual and $60,000 for a family, can be exempt from seizure in a bankruptcy. Anything exceeding those amounts cannot be guaranteed to receive protection during bankruptcy. It is required that anyone filing for bankruptcy to report inheritance in the bankruptcy estate. Any attempt to conceal or transfer assets may be considered a fraudulent action, resulting in serious consequences.
Inheriting Money After Bankruptcy
Bankruptcy laws state that any inherited income or assets within 180 days of filing for bankruptcy could be seized and liquidated to satisfy debts to creditors. The important thing to remember is the time line between when you filed for bankruptcy and when you inherited the money. Day one begins the date your file for bankruptcy. The date of inheritance begins on the date of death of the person leaving you the inheritance, not the date you obtained the income or assets in your possession. If you obtain an inheritance before the 180 days, you risk qualifying for bankruptcy. The bankruptcy courts may deem your income to be too high to qualify for bankruptcy assistance, and you would remain responsible for repaying your debts. If you did qualify for bankruptcy, the courts could rule that some or all of your inheritance be used to repay your creditors. Any income or assets inherited after 181 days is generally of no concern to the bankruptcy court.
How To Proceed
The first thing you should consider is your current and future financial situation. If you will be able to repay your debts, with or without an inheritance, you should remember it is responsibility to pay debts you accrued. However, it is important not to spend all of your inheritance on repaying your debts. You may need some of the money for a rainy day or financial emergency. When developing a plan to repay your debts, contact your creditors to negotiate more favorable repayment terms. Creditors would prefer to negotiate and recoup most of their money that have the debts eliminated through bankruptcy. You will have the opportunity to make right on your obligations and repair your credit. If you will not be able to repay your debts, contact a qualified bankruptcy attorney to help you evaluate your financial situation and develop a plan to put you back on the track to financial stability.