There are many different chapters of bankruptcy therefore there are many different ways that the bankruptcy court will deal with a debtor who is inheriting from a will, trust, or estate. One should absolutely discuss inheritance or the possibility of inheriting with their bankruptcy attorney. An inheritance could be at risk of being attached by creditors.
The most common types of bankruptcy are chapters 7 and 13. In chapter 7, 99.9% of the time, the Debtor is looking to get a discharge order from the bankruptcy court which would relieve the Debtor’s obligation to certain debts. Most often than not, these debt’s are “general unsecured non-priority” debts. When you seek this type of relief, the bankruptcy court allows you certain exemptions, that is, items that may not be attahced by creditors. Inheritance does not get an exemption. If a debtor has or will inherit from an estate, will, trust within 6 months of filing for chatper 7 or 13, this must be disclosed to the bankruptcy trustee appointed to the bankruptcy case.
The worst case scenerio is that a creditor, or creditors will attach a debtors entire inheritance. This unfortunately happens when a Debtor is inadequately represented, or if a Debtor foolishly decides to represent him/her self.
Just this morning I had a phone call from a prospective client who filed chatper 7 representing themselves, and did not disclose the fact that they were intitled to inherit from an estate. The Debtor received a discharge, and the case was closed. Later the bankruptcy trustee had the case reopened, and is now looking to recover the inheritance. THis could have all been avoided had the debtor discussed the case with an Ariozna bankruptcy attorney.
If you have any concerns about inheritance and you are considering bankruptcy, TALK TO AN ATTORNEY who is experienced with the bankruptcy code.
Here at the Yontz Law Group, we’ve dealt with this situation many times and can answer any questions you have about bankruptcy.
Call for your free consult: (480) 447-1554