Photo by Melinda Gimpel
Originally Posted On: https://mynewyorkcitylawyer.com/does-bankruptcy-affect-an-inheritance/
I’ve been asked recently how a bankruptcy will affect an inheritance. It’s not an easy question, but you must list anything you’re going to inherit.
If you know someone died and you’re listed in the will, or if you know someone died and you were a relative who would receive an award if there’s no will, that must be listed in the bankruptcy. However, you can keep a certain amount of that by listing it as an asset and claiming the proper exemption, including a wildcard exemption, if applicable.
If you know you may receive an inheritance
Now, there’ll also be a follow up in court at the 341 hearing where the trustee, which is an attorney, will ask you questions. Did anyone die? Did you receive an inheritance? Do you expect to receive an inheritance?
Because if you are going to receive an inheritance in the near future, it may be an asset of the estate, and that means it’s something you would be entitled to. And if it’s a large amount of money, then you may only keep a portion of that. And the other portion would go to the creditors, the people you owe money to.
Discuss it with your attorney
So if you’re going to inherit money and you know the amount, it would be wise to discuss it with an attorney to see if that amount qualifies, and whether you’d be able to keep it all or how much you would be able to keep. For example, let’s say you’re going to get $100,000, and the court says you can keep $25,000. That would leave $75,000 available to creditors.
A way to approach your creditors
Depending on how much you owe to creditors, an alternative could be to get the money from the inheritance. Then have your lawyer negotiate with the creditors. That means the lawyer would call the creditors up to see how much each one wants, and maybe they could reduce the amount by providing a full payment upfront.
For example, if you owe a creditor $10,000, maybe your lawyer can negotiate a deal where you only have to give them $5,000. Clearly, you’d be saving $5,000. But a lot depends on how much you’re going to inherit, how much money you owe, and how much you’re going to be able to qualify as an exemption, which wouldl allow you to keep a certain amount of money.
It depends on several factors
It also depends on what your other assets are. Because depending on how you want to allocate the assets and the exemptions, you may want to claim federal exemptions or state exemptions.
So the short answer is you may be entitled to your inheritance. You may be able to file a bankruptcy. You may be able to keep most, if not all of your inheritance. But it depends upon the particulars of your case.
What you should do
A careful analysis should be done with someone who knows the ins and outs of figuring out what’s best for you. Give me a call if you want to discuss the matter. Set up a consultation to determine whether the bankruptcy would be the best option for you and how to preserve as much of your inheritance as possible.
Also, it’s a question of timing. When would you file the bankruptcy? Call me up if you have any questions. I’ll be happy to discuss it in-depth with you to determine what’s best for you.
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