How is an inheritance handled when the debtor is in a Chapter 13?

I am 4 1/2 years into Chapter 13. My mom just died and I am the beneficiary of a $200,000 life insurance, less funeral and final expenses. Can they take the proceeds?

Asked on March 21, 2012 under Bankruptcy Law, South Carolina


M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

I am so sorry for your loss.  You are well in to your bankruptcy and that is a plus.  In a Chapter 13 those funds could be considered part of the bankruptcy estate but it really depends on the trustee and the law in your state.  Sometimes only "excess funds" are taken but what is deemed excess depends on the facts of the case.  Good luck. 

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

If you are four plus years into your Chpater 13 (reorganization plan) the inheritance that you may end up receiving with respect to your mother's estate will have no bearing on your bankruptcy so long as you are current in paying your creditors. The reason is that your financial status at the time you filed for bankruptcy protection determines your eligibility for a particular plan, not what happens after you have filed for bankruptcy protection.

The proceeds from your mother's estate should be yours to keep and possibly pay down quicker your creditors.

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