If someone filesa Chapter 13, must they hand over any inheritance they subsequently receive to their trustee?

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If someone filesa Chapter 13, must they hand over any inheritance they subsequently receive to their trustee?

Asked on December 4, 2010 under Bankruptcy Law, New York

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If you inherit something during the 3 to 5 years of your repayment plan, the inheritance must be turned over to the Chapter 13 trustee.  In fact, any property that you acquire as an inheritance within 180 days of filing must be reported. It will then distributed to the unsecured creditors up to the extent of the allowed unsecured claims.  Basically, you should view any income from the inheritance as a means of paying off your creditors that much faster.  Chapter 13 bankruptcy focuses on paying off your debts over a period of several years, so any unexpected income will help you reach this goal sooner.   

Note:  Don't be tempted to not report an inheritance or otherwise hide it.  That would be fraud and as the possibility of having your case dismissed "with prejudice" (as well as open you up to legal penalties).  This would prevent you from being able to discharge your debts. 


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