If you need the protections offered by bankruptcy law, but you’re worried about your inheritance and how it could be affected, this article is for you.
How Does Filing Bankruptcy Affect My Inheritance?
When filing Chapter 7 or Chapter 13 bankruptcy, how an inheritance will be affected is determined by state bankruptcy law and the predetermined state bankruptcy exemptions.
Is There an Exemption that Applies to My Inheritance?
A bankruptcy exemption is a type (and specific allowable amount or value) of property a bankruptcy petitioner can keep. Some states allow the use of federal exemptions, but Tennessee does not. Petitioners seeking to exempt an inheritance need to use the state bankruptcy exemptions. Most bankruptcy petitioners in this situation turn to the “wildcard exemption”, Tenn. Code Ann. § 26-2-103 to exempt an inheritance. (The wildcard exemption can be used to cover a wide range of assets). For a single petitioner, the wildcard exemption covers up to $10,000.
If an Inheritance is Not Covered by Tennessee Bankruptcy Exemptions:
If a bankruptcy petitioner’s inheritance is not covered by a state bankruptcy exemption, the asset becomes part of the estate available for the bankruptcy trustee to liquidate to pay creditors (or to use for payment plan calculations if filing Chapter 13 bankruptcy).
What Happens If a Petitioner Receives an Inheritance After Receiving their Discharge of Debt?
If a Chapter 7 bankruptcy filer’s loved one passes away over 180 days after they filed for bankruptcy, the inheritance is not affected by the bankruptcy. The entire inheritance is theirs to keep. The petitioner is not required to notify the court, the trustee, or past creditors of the inheritance if 180 days have passed since filing bankruptcy. In Chapter 13 bankruptcy, the inheritance can still be used to calculate the three to five-year payment plan amount regardless of the timing.
If you need help filing bankruptcy, but you have questions about your inheritance, call Kenneth C. Rannick P.C., Tennessee, and Georgia bankruptcy attorney to ask about getting a fresh financial start. We help good people through bad times.