Inheriting Money In Bankruptcy

The bankruptcy process is packed full of specific rules and guidelines for how certain aspects are to be handled. While the process is not meant to be difficult or excluding, there are some rules that apply to your financial details that could change over the course of the case. One example is income, where any increases or decreases in income after filing could influence the rest of the case.

Coming Into Money

While not everyone has the luxury of inheriting money, it does happen. Outside of bankruptcy inheriting money is a welcomed occurrence, but when it happens in the midst of your bankruptcy case it can complicate things.

If you have filed for Chapter 7 bankruptcy, your inheritance money is likely to become part of your case. This isn’t to say that you will lose the money to creditors. The key is timing. If you receive your inheritance 180 days or more before you file your case, or after your case is discharged, your inheritance in exempt from the filing. If you receive the inheritance 180 days or less from the date of filing, or after you file, the money must be reported counted as part of your income in the case.

In a Chapter 13 bankruptcy, the 180 day rule does not apply. Since a Chapter 13 case can take anywhere from three to five years before a discharge is received, any inheritance during this time is required to be reported and counted towards your income level. The money will simply inflate your overall income level, which could be an increase in your monthly payment requirement.