Filing for bankruptcy is difficult enough without having to factor in an unexpected inheritance. The additional value can cause the court to reevaluate your assets and use it to pay off debts. However, bankruptcy law requires certain factors to be in place in order for this to happen. Consider the following answers to commonly asked questions to determine the best way to proceed.

Frequently Asked Questions About Bankruptcy Law & Inheritance

What happens when one files for bankruptcy?

The court will create what is known as a bankruptcy estate. It includes all of your monetary assets as well as vehicles, your home, and your property. The type of bankruptcy you file for will determine the distribution of assets. Chapter 7 is done through total liquidation, while Chapter 13 adjusts the debt to a more manageable level. Your lawyer will figure out which option is best for you.

How do inheritances factor into the process?  

It depends on the timeframe. Those that inherit within 180 days of filing for bankruptcy must reveal the additional assets to the court. For a Chapter 7 bankruptcy, the inheritance automatically becomes a part of your estate. Chapter 13 will calculate the monetary value into your assets and pay them out as installments. Possible exemptions for property inheritance may apply under state and federal law.

What if it belongs to my spouse?

In this case, it is completely untouchable. As long as you don’t combine resources and file as an individual, any amount that the other person acquires is safe from inclusion in the case.

What can I do to keep my inheritance out of the estate?

The only form of protection is to have the relative put every asset into a revocable living trust. This keeps the assets from passing to the beneficiary prematurely and allows the benefactor freedom to make changes. If the beneficiary needs to file for bankruptcy, their coming inheritance won’t be counted toward the debt.

If you need guidance with an estate, turn to Steven P. Ciardiello Esq., PC, in Hamden, CT. They have been providing quality legal counsel for over 30 years and are certified to practice in Connecticut as well as New York. In addition to bankruptcy law, these professionals also specialize in wrongful death, estate planning, and work injuries. They are committed to protecting the rights of their clients and upholding the standards of justice. For a full list of services, visit their website. Set up a consultation by calling (203) 248-8000.