Bankruptcy and Inheritance

[JudeJMG]

What is the name of your state? PA

In order to save my house from foreclosure, I filed Chapter 13 in April of 2005 on advice from a bankruptcy attorney. In December of 2005, my mother passed away and I am now due to inherit a modest amount from her estate sometime in the next few months. When I contacted my attorney after my mother died, he said I didn't have to report the inheritance, that there's no way for the Trustee to find out about it without my reporting it. Is this true? I want to do the right thing and I don't know that I can trust my lawyer's advice on this.

Also, if I do report the inheritance, will the Trustee take the amount and apply it to the bankruptcy as it stands, or will the unsecured creditors (who received nothing under the terms of the Chapter 13) now stand to get all of it?

I'm already working three jobs, but it's still been really hard for me to keep up the bk payments along with the mortgage payments for the past year, especially when the amount of my mortgage payment went up by over a hundred dollars a few months ago. Knowing that I have four more years to go, my stress levels are through the roof at this point, and I'd hate to think that inheriting this money isn't going to help the situation at all.

Thanks for your help and suggestions.

 

[Betty]

What is the name of your state? PA

In order to save my house from foreclosure, I filed Chapter 13 in April of 2005 on advice from a bankruptcy attorney. In December of 2005, my mother passed away and I am now due to inherit a modest amount from her estate sometime in the next few months. When I contacted my attorney after my mother died, he said I didn't have to report the inheritance, that there's no way for the Trustee to find out about it without my reporting it. Is this true? I want to do the right thing and I don't know that I can trust my lawyer's advice on this.

Also, if I do report the inheritance, will the Trustee take the amount and apply it to the bankruptcy as it stands, or will the unsecured creditors (who received nothing under the terms of the Chapter 13) now stand to get all of it?

I'm already working three jobs, but it's still been really hard for me to keep up the bk payments along with the mortgage payments for the past year, especially when the amount of my mortgage payment went up by over a hundred dollars a few months ago. Knowing that I have four more years to go, my stress levels are through the roof at this point, and I'd hate to think that inheriting this money isn't going to help the situation at all.

Thanks for your help and suggestions.

It is my understanding that if you receive an inheritance within 180 days (6 mos.) after filing for bankruptcy, that money/property may have to be paid to your creditors if not exempt. It looks like you are ok since you are over the 180 day rule.

 

[bigun]

In a Chapter 13, you are supposed to report an inheritance.
The question about if a trustee will find out is dependent on how aggressive they audit the filings. If you are asked point balnk about an inheritance, ai wouldn't lie.
Unless the inheritence is ezwmpt in some way, the trustee will use it to up the payout to unsecured creditors.

There comes a point when you need to realize you have something that you can't afford. Working 3 jobs to make a mortgage payment and you are still struggling should be a clue.
You should have either sold the house and banked any equity or, let it foreclose and file a Chapter 7.

 

[Betty]

The information I have indicates in a Chapter 13 bk, if you receive an inheritance that would have been the property of the estate at the time of filing for bk, it would be considered in the bk & would have had to be brought to the attention of the attorney. However, if you receive an inheritance/propery 180 days or more after filing, you would not need to use it to pay creditors. edited to add the word days after 180

 

[bigun]

However, if you receive an inheritance/propery 180 or more after filing, you would not need to use it to pay creditors.


This is not correct. Inheritences as well as increases in income of more than 10% are supposed to be reported. How aggressive a trustee is in demanding that infomation varies by district.

 

[Betty]

However, if you receive an inheritance/propery 180 or more after filing, you would not need to use it to pay creditors.


This is not correct. Inheritences as well as increases in income of more than 10% are supposed to be reported. How aggressive a trustee is in demanding that infomation varies by district.

You may be correct but several web sites indicate after 180 days of filing an inheritance is safe - it's also in a law book I have (recent book w/ new bk rules). I would like to know what is correct since we seem to have different info - maybe someone else knows the rule. I just want to know the correct info for the future - you may be right but all my info says different. Have a nice day. Betty

 

[bigun]

Inheritences due 180 days after filing are safe in a Chapter 7.
This is a Chapter 13 plan. All future income must be included in the plan.

http://www.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00001322----000-.html



(a) The plan shall—
(1) provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan;

and

(8) provide for the payment of all or part of a claim against the debtor from property of the estate or property of the debtor;

Also, look at the OP's post. His lawyer didn't say he shouldn't report it becuse it was exempt. He just said the trustee wouldn't find out unless, it was reported.If the money is exempt, why not report it?

 

[Betty]

The law book (written by a lawyer) I have said (though in his own words) under a chapter 7 or chapter 13 bankruptcy, any inheritance received that would have been part of the property at the time of filing for the bk would have to be included unless exempt. Also, any inheritance (or property) received within 180 days of the filing would need to be reported to the attorney & trustee. However, after the 180 days, the inheritance need not be reported & is exempt from seizure by creditors.
Under the http://www.faqfarm.com web site re chapter 13 bk (inheritance recvd. after), it says inheritance need not be reported if received after 180 days of discharge (said discharge - not filing - law book said filing) of bk unless bk is still active.
I was not able to bring up the web site you indicate - looks like they want a donation.
Thanks for the info you typed out.

 

[bigun]

it says inheritance need not be reported if received after 180 days of discharge (said discharge - not filing - law book said filing) of bk unless bk is still active

There you go- our posters bk is still active. I think the poster just misspoke when he said discharge date.
On the Cornell site, just elect "ask me tomorrow" and it'll let you in. They do a fundraiser every now and again.

 

[Betty]

This is really confusing - see http://www.njanedubovy.com/chapter13bankruptcy.html under timing of filing - be alert to timing of an any inheritance or life ins. within 180 days of filing. I'll try the web site you gave later. Some places say filing & some discharge - my law book said filing & ok if still active -- the 180 days just need to be elapsed since filing.

 

[Betty]

I checked with my sister-in-law -- works for a lawyer part time -- she has some of her work notes on her home computer. She said her notes say (though this is just what she was told - possibly not correct) that chapter 7 & 13 bankruptcy -- if inheritance received within 180 days of the filing date, it needs to be reported to attorney and/or trustee. (though could be exempt from bk) If the 180 from filing date has elapsed, the person is home free so to speak even if bk still ongoing. The OP is probably really confused - I know I am. I almost forgot his orig. question. I think it best he report any inheritance to the trustee & go from there - see what happens. Betty

 

[Tking123]

I am currently in a Chapter 13 repayment plan myself. I received The Notice of the Order Confirming the Plan from the United States Bankruptcy Court which states in paragraph 3:

"All of the disposable income of the Debtors shall be submitted to the payment of creditors of this estate from the beginning date of the first payment until the plan may be terminated, and they will provide such information as may be requested by the Trustee to exhibit the disposable income."

 

[racer72]

I am currently in a Chapter 13 repayment plan myself. I received The Notice of the Order Confirming the Plan from the United States Bankruptcy Court which states in paragraph 3:

"All of the disposable income of the Debtors shall be submitted to the payment of creditors of this estate from the beginning date of the first payment until the plan may be terminated, and they will provide such information as may be requested by the Trustee to exhibit the disposable income."

Did you happen to notice this thread is over 3 years old? Most that posted in this thread are long gone. Necroposting is considered rude.

 

[Tking123]

No, I didn't notice that. Sorry. Thanks for straightening me out. You're the best!

 

[donhoje]

You don't need to report it if it's been more than 180 days

I agree with bigun, you wouldn't need to report it if it has been more than 180 days.


http://www.thedrakelaw.com/2012/05/11/can-i-inherit-property-while-im-in-bankruptcy-or-file-bankruptcy-after-i-inherit-property/