Unfortunately, we have seen clients inherit money from the passing of a relative after filing bankruptcy in Minnesota. The impacts of the inheritance on your bankruptcy depend on which chapter of bankruptcy you are in and how much you inherit.
How Chapter 7 Bankruptcy Will Be Affected By an Inheritance in MN
If you file Chapter 7 bankruptcy, the timing of the inheritance is very important. The bankruptcy code states that if you inherit any property in the first 180 days after filing bankruptcy (starting the date you filed your petition for bankruptcy relief), the inheritance is an asset of your bankruptcy estate. This may spark two questions for you: 1) when do I technically inherit, and 2) what is the bankruptcy estate?
Date of Inheritance in Minnesota
You inherit the date that the decedent passed away. It doesn’t matter what day you actually receive the money or property you inherited, but rather, what day the decedent passed.
Bankruptcy Estate
The bankruptcy estate consists of the assets you own at the time of filing. In a Chapter 7 bankruptcy, these assets are at risk of liquidation by the trustee if they do not fit into one of the bankruptcy exemptions which protect your assets so you can keep them. An experienced Kain & Scott bankruptcy attorney will help make sure as many, if not all, of your assets are protected. This also goes for the inheritance.
If You Inherit Within 180 Days in Minnesota...
If you inherit within the first 180 days after filing bankruptcy, your experienced Kain & Scott bankruptcy attorney can help you navigate whether the inheritance is protected based on how much you are set to receive and how much room you have within your exemptions.
If you inherit in day 181 or later after filing for bankruptcy, it is not an asset of your bankruptcy and it is fully yours to keep.
How Chapter 13 Bankruptcy Can Affect Your Inheritance in MN
A Chapter 13 bankruptcy is a 3-5 year payment plan where the debtor dedicates their monthly disposable income to their creditors and then at the end of the payment plan the unpaid portion of the dischargeable debts is forgiven. If you inherit during a Chapter 13, the inheritance is technically new disposable income that the Chapter 13 trustee would have an interest in. It is important that you let your Kain & Scott attorney know if and when you inherit while in a Chapter 13 so they can negotiate on your behalf to allow you to keep as much of the inheritance as possible.
The trustee will need a portion, and sometimes all, of the inheritance paid into the bankruptcy, depending on the amount you inherit and other personal facts that may work in your favor. An experienced Kain & Scott bankruptcy attorney can help you negotiate the best deal should you inherit in a Chapter 13 bankruptcy.
CALL NOW FOR A FREE STRATEGY SESSION FROM A MN BANKRUPTCY LAWYER AT KAIN & SCOTT
Kain & Scott’s experienced bankruptcy attorneys know how to protect your assets in both Chapter 7 and Chapter 13 bankruptcy. If you are interested in learning more about how bankruptcy can help with your debts, reach out to Minnesota’s nicest bankruptcy law firm by going now to www.kainscott.com. You will be thankful you did.
