If you come into an inheritance after you file bankruptcy, can the creditors claim it?   If your benefactor died within 180 days of the filing, the short answer is yes.  On the other hand, if he or she holds out for 181 days, you get to keep the money (if you are in a Chapter 7).

Filing a bankruptcy petition creates a bankruptcy estate, which includes everything the debtor owns or is entitled to as of the commencement of the case.  Unless an asset in the estate is entitled to an exemption under state or federal law, it becomes available to the creditors.  You might think that if your relative dies after you file, the inheritance would be excluded from the estate, because you would receive it after “the commencement of the case.”   You would be mistaken.

The bankruptcy code also sweeps into the estate any interest in three types of property the debtor acquires or becomes entitled to within 180 days after filing.  Those three types of property are (A) a bequest, devise or inheritance, (B) a property settlement with a spouse, and (C) proceeds of a life insurance or death benefit plan.  Note that this includes an interest which the debtor “acquires or becomes entitled to.”  This means that the relevant date is not when the debtor receives the money, but the date of death, when the debtor becomes entitled to it.

If you think you may be entitled to an inheritance in the near future, you may need to give very careful thought to this issue.

Remember, this advice concerns Chapter 7 only.  If you are in a Chapter 13 plan and you receive a windfall of any kind the creditors would be entitled to it.  Keeping that in mind, if your income is sufficiently high that application of the Means Test could force you into a Chapter 13, you may want to think about the likelihood of coming into the inheritance while you are still in the plan, that is, within the next five years.


Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need bankruptcy protection. Call him at 770-393-4985 for a confidential discussion.

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