For many people, an inheritance is a bittersweet thing. On the one hand, it means that a family member or close friend has passed away. On the other, it means the person is in line for an influx of cash or property that could make their financial outlook much brighter.
But what happens when the beneficiary is in the process of bankruptcy? Can an inheritance be protected from money grubbing creditors?
Colorado Springs bankruptcy attorney Stephen H. Swift recognizes the sensitivity of these matters and the strategy that may be necessary to handle an inheritance during or after bankruptcy. Bankruptcy laws are designed with consumers in mind, but they are highly complex and best negotiated with the advice of an experienced attorney.
How Is An Inheritance Treated in Bankruptcy Court?
The good thing about bankruptcy is it gives the consumer options. Rather than simply being stuck with debt, making minimum payments month after month, dealing with wage garnishments and letters threatening legal action, the consumer can take charge of their life.
And in the bankruptcy process itself lies options that may be able to best help the filer, such as whether Chapter 7 bankruptcy or Chapter 13 bankruptcy works best. This is true when dealing with inheritances as well.
According to bankruptcy law, if a debtor receives an inheritance within 180 days of filing for bankruptcy, it must be reported to the court and it becomes property of the bankruptcy estate. Not telling the bankruptcy court about an inheritance can result in criminal charges of bankruptcy fraud and bankruptcy trustees are paid to keep track of these things even if filers aren’t honest about it.
What also should be kept in mind is when the person leaving the inheritance dies. If the person dies within 180 days of you filing for bankruptcy, but it takes several years for the probate court to dole out the property, it would still be turned over to the court.
So, what can I do to protect an inheritance?
- Set up a spendthrift trust: This allows the debtor to protect any money that may be inherited.
- Have the money willed to a relative: If a family member you trust is willing to keep the money and give it to you as a gift after the bankruptcy is finalized, you can’t blame the sick for changing their will. Fair warning though, such a situation may come perilously close to fraud in the minds of investigators.
- Disclaim an inheritance: If you’re in the middle of bankruptcy and have made no arrangements and don’t want that money going to creditors, simply don’t take it. You aren’t forced to accept an inheritance.
Bankruptcy law does allow exemptions, so under certain circumstances, a debtor may be able to protect certain pieces of property from creditors. That is a matter that should be discussed with the Law Office of Stephen H. Swift. Obviously, a wrong move here could see your family member’s money or property swept away by the very companies you are trying to get away from. Family heirlooms, hard-earned cash, bonds and other inheritance should be protected whenever possible.
If you are considering bankruptcy, call for a free initial consultation to discuss your situation, your rights and whether bankruptcy may be right for you. Serving clients in in Colorado Springs, Pueblo, Denver and the surrounding area.
Colorado Springs bankruptcy – 866-893-2440 or 719-520-0164 – legal consultation
