Inheritance

Posted by Kevin on June 22, 2011 under Bankruptcy Blog | Be the First to Comment

In a Chapter 7 case, at the meeting of creditors, the trustee almost always asks whether you are going to receive an inheritance within 180 days.  If so, the trustee has a right to claw back that inheritance less any exemption that you might have.

That might not be the case in a Chapter 13, however.  In a recent case out of the bankruptcy court in Illinois, the debtor in a Chapter 13 listed an interest in a probate estate in his schedules and took an exemption.  The debtor was saying that, in effect, the inheritance was an asset.  The Chapter 13 trustee and the court took a different approach.  They said the inheritance was income and needed to be paid into the plan together with the payments already proposed.  The court reasoned that if the debtor had not filed bankruptcy and received the inheritance, it would be subject to attachment by his creditors, so why should it be different in bankruptcy.

Make sure that when you are discussing bankruptcy with your lawyer that you mention any probate situation.  It may impact the advice that will be given.