If my husband and I filed Chapter 13 last month but we just found out he is inheriting $40,000, do we have to give the money to the plan?

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If my husband and I filed Chapter 13 last month but we just found out he is inheriting $40,000, do we have to give the money to the plan?

My husband is inheriting from his late mother’s Trust. She passed away 4 months ago.

Asked on January 26, 2015 under Bankruptcy Law, Ohio

Answers:

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

Answered 6 years ago | Contributor

An inheritance is deemed to be received when a beneficiary becomes entitled to it (i.e. at the time the person making the gift passes), not when they actually collect it. Therefore, your husband's inheritance affected your Chapter 13 filing; pursuant to your repayment plan most of your property becomes part of the bankruptcy estate. While a Chapter 13 trustee does not liquidate your property and distribute it to your creditors (as in a Chapter 7). in Chapter 13 you get to keep your property, however you must pay a certain amount of your debts back. Accordingly, if filing jointly and your spouse receives a significant inheritance, the trustee will want you to pay your creditors more (i.e. receiving an inheritance during a Chapter 13 can increase what you have to pay into your plan).

However, how much additional you may have to pay depends on when the inheritance is received. If it was within 180 days of filing your case, the trustee will most likely require unsecured creditors be paid at least an amount equal to the "non-exempt" portion of the inheritance. If the inheritance is received more than 180 days after filing, the trustee may propose that you pay the inheritance into your repayment plan. Not withstanding the foregoing, not all courts have ruled on this issue. For those that have so ruled, the majority have required the debtor to pay the inheritance into the plan; a few courts however, have allowed the debtor to keep their inheritances if they received it after the 180-day period passed.

Since this is a very technical matter and can be affected by the particular jurisdiction that you filed in, you really should consult directly with a local bankruptcy attorney.

 


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