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Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 31021
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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My sister and her husband filed a Chapter 13 bankruptcy a

Customer Question

My sister and her husband filed a Chapter 13 bankruptcy a year ago. Sometime this month, she will receive a $20,000 inheritance. Can she keep it?
Submitted: 1 year ago.
Category: Bankruptcy Law
Customer: replied 1 year ago.
They live in Kentucky.
Customer: replied 1 year ago.
The information that I have found so far says that a judge will make a ruling on the funds.
Expert:  Roger replied 1 year ago.

Hi - my name is ***** ***** I'll be glad to assist.

If the inheritance was received within 180 days of filing the case, the trustee will require you to pay unsecured creditors at least an amount equal to the nonexempt portion of your inheritance. The trustee will argue this is fair because their creditors would have been entitled to that amount if this was a Chapter 7 case.

Even if the inheritance was received more than 180 days after filing Chapter 13, the bankruptcy trustee may argue that she should pay the inheritance amount into their Chapter 13 plan. Not all courts have ruled on this issue. For those that have, most have required the Chapter 13 debtor to pay the inheritance amount into the plan, often reasoning that the inheritance is a windfall and should be part of your bankruptcy estate. A few courts have ruled otherwise, and allowed Chapter 13 debtors to keep inheritances they've received after the 180-day period has passed.

Expert:  Roger replied 1 year ago.

So, much will depend on their trustee and judge and how they view these issues. Also, it really depends on how much she's inheriting and how much the unsecured creditors are being paid under the plan.

Customer: replied 1 year ago.
I understand about the 180 days. In my question, I stated that she would inherit soon and that the bankruptcy was filed a year ago. This is not more info that the bankruptcy website gave me.
Expert:  Roger replied 1 year ago.

Yes, I understand that she's past the 180 that is one hurdle, BUT her trustee may argue that even though she's past that time, the money should still be turned over to pay her unsecured creditors.

Expert:  Roger replied 1 year ago.

This is one of those things that courts have not uniformly ruled on -- even within the same state. So, it's not possible to definitively say what will happen, but it is certainly possible that it will be taken.

Expert:  Roger replied 1 year ago.

Usually, it really depends on how much is owed to unsecured creditors and how much the inheritance is as to whether the trustee will come after it or not.

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