If you are considering filing for bankruptcy, or have already filed, and recently received an inheritance, you're probably curious about how inheritance laws interact with the bankruptcy law.
Typically, inheritances, whether they are received as cash or physical assets, are treated as income for bankruptcy purposes.
The key distinction in determining whether an inheritance becomes attached to a bankruptcy estate is the timing of the inheritance. This issue is addressed below.
If a person receives an inheritance during a bankruptcy filing, that inheritance might become part of the bankruptcy estate. This is determined by the timing of the inheritance, which is divided into two different types.
If a filer receives an inheritance within 180 days of the initial bankruptcy filing, they must usually:
Bankruptcy exemptions are often determined by local property laws, so a bankruptcy attorney in your area may help you determine if your inheritance is exempt.
If filers obtain an inheritance after 180 days have passed since their initial filing, the interplay between inheritance laws and bankruptcy may be very different:
The seemingly arbitrary 180-day rule was created to prevent people from filing bankruptcy early in order to protect a forthcoming inheritance. In theory, the rule is supposed to stop so-called preemptive filings.
While bankruptcy typically treats inheritances in a uniform fashion, state property laws vary widely. These different laws may have substantial impacts on bankruptcy cases.
For more information about inheritance laws and bankruptcy, many filers contact a a lawyer who practices bankruptcy.
To connect with a bankruptcy lawyer in your area for a free consultation about how bankruptcy laws may work for you, fill out the quick case review form: