Can I Inherit Property During My Chapter 7 Bankruptcy Case?
If you are planning to file for Chapter 7 bankruptcy as an individual (as opposed to a business), or if you are already in the midst of a Chapter 7 bankruptcy case, you may have learned recently that you will soon inherit property or assets from a loved one. Given that Chapter 7 bankruptcy is a type of liquidation bankruptcy in which non-exempt assets are liquidated so that creditors can be paid and the debtor can receive a discharge of eligible debts, you may be concerned that any inheritance will also be liquidated. Accordingly, you might be wondering: can I inherit property during my Chapter 7 bankruptcy case?
The short answer is that it depends on the circumstances of your case. If you have not yet filed for bankruptcy, you should discuss the timing of your case with a bankruptcy attorney in West Palm Beach. In the meantime, we can provide you with more information about how inheritances are treated in a Chapter 7 bankruptcy.
Special Rule for Inheritances in Chapter 7 Bankruptcy Cases
The first thing you should know is that, under U.S. bankruptcy law, there is a special rule for inheritances in Chapter 7 bankruptcy cases. This rule is commonly known as the “180-day rule,” and it determines whether or not an inheritance will be considered part of the bankruptcy estate. If an inheritance is considered part of the bankruptcy estate, then you will need to determine whether an exemption applies to the inheritance if you want to keep it. Otherwise, it will be subject to liquidation.
When You Inherit Property Within 180 Days of Filing for Bankruptcy
If you inherit property within 180 days of the date that you filed for bankruptcy, or if you inherited the property prior to filing for bankruptcy, the inheritance will be considered part of the bankruptcy estate. What that means is that the trustee will liquidate the inheritance to repay your creditors unless you are able to show that the inheritance is exempt.
There are a wide range of bankruptcy exemptions in Florida that could apply to an inheritance, depending upon what it is that you are inheriting. If you are inheriting a specific item or tangible property, for example, you will want to determine whether there is an exemption under Florida law for the specific type of property, or for the value of the property. Sometimes inheritances largely have sentimental value, and a low market value could mean that you are able to exempt the inheritance through Florida’s wildcard exemption. Similarly, a small amount of a cash inheritance could potentially be exempted with the wildcard exemption.
Date of Inheritance is the Usually the Date You Learn About the Inheritance
Finally, for purposes of counting the clock on the 180-day rule, the date of an inheritance is usually the date that you learn you are inheriting an asset, not the date you actually take possession of it or receive it.
Contact a Chapter 7 Bankruptcy Lawyer in West Palm Beach
If you have any questions about inheritances in your bankruptcy case or general questions about Chapter 7 bankruptcy, you should seek advice from a West Palm Beach Chapter 7 bankruptcy attorney at Kelley Kaplan & Eller today.