An inheritance can be a mixed blessing for those thinking about filing for bankruptcy. I've seen people who are the perfect candiates for bankruptcy, only to have a wrench thrown into their plans when someone dies and leaves them money or a house. On the one hand, this is the time in their lives when they probably most need their inheritance, yet it disrupts what could have otherwise been a successful bankruptcy. Under bankruptcy law, you are entitled to the inheritance once the person leaving it to you actually dies, regardless of when you actually receive it. The inheritance is usually a real asset. In other words, real money or real property is coming in. If someone has already filed for bankruptcy, they must notify the bankruptcy court - usually through their lawyer- if an inheritance becomes an issue. The law says that if someone receives an inheritance within 180 days after they file, it is part of the bankruptcy estate. This means that a bankruptcy trustee can take it to pay off creditors. Everyone is allowed certain "exemptions"- or money/property that they can keep, but only up to a certain dollar amount. Anything above and beyond this is usually going to be fair game.
If you are facing the possiblitly of bankruptcy but also know that an inheritance is coming your way, give us a call to discuss your options.