Bankruptcy is a complex process, especially in New York when inherited property is involved. Debtors often ask, “Can the trustee take my inheritance?” The short answer is: maybe. It often depends on when you inherited the asset, what it is, and the bankruptcy chapter you filed. Given the intricacies of bankruptcy laws (what property is exempt), it is in your best interest to speak with an experienced Rockland County Bankruptcy Attorney. Our legal team is prepared to assess your unique situation, explain your rights, and help you shield as much of your inheritance as possible.
What is the 180-Day Rule?
First and foremost, it is crucial to understand that a bankruptcy trustee’s primary objective is to repay your creditors, not help you retain assets. This creates a major conflict when you receive an inheritance, as the trustee views it as a source of funds for the estate.
In a Chapter 7 case, any inheritance you become legally entitled to within 180 days after you file automatically becomes part of your bankruptcy estate and can be claimed by the trustee. It should be noted that this applieseven if the funds haven’t been distributed yet. Inheritances received after the 180-day deadline are generally safe.
The trustee’s unique approach to your case depends on the specific asset. Cash is typically the easiest to claim, while real estate or personal property can be sold or abandoned based on its value and liquidation difficulty. Whether you opt for New York or federal exemptions before filing can also significantly influence how much of an inheritance you are allowed to retain.
Does a Trustee Have Greater Authority in a Chapter 7 or Chapter 13 Bankruptcy Case?
If you receive an inheritance within 180 days after filing Chapter 7, the bankruptcy trustee can claim it. They will liquidate any assets that are not legally shielded to satisfy outstanding debts. You are legally obligated to disclose this asset. Attempting to conceal it may jeopardize your debt discharge or lead to accusations of fraud. A knowledgeable Rockland County bankruptcy attorney can help determine which assets you can keep and how to properly report them.
For Chapter 13, the focus moves from seizing the asset to evaluating your increased ability to pay creditors. Inheriting funds will prompt the trustee to seek an increase in your monthly payments or demand a portion of the inheritance as a one-time payment. You may have the option to negotiate with the court and the trustee to retain some of the funds in exchange for agreeing to higher payments over the course of the plan. Seek the guidance of a Rockland County bankruptcy attorney to determine whether remaining in Chapter 13 or converting your case to Chapter 7 is the best approach given the unique circumstances of your case.
For more information, please don’t hesitate to contact an attorney at The Lauterbach Law Firm.
