At the moment you file a bankruptcy petition, a snapshot of your financial circumstances is recorded for administering your bankruptcy case. For example, it's at this moment that your property becomes the property of your bankruptcy estate, subject to any exemptions. What happens to property received after the bankruptcy petition is filed? What if an inheritance is received postpetition?
The filing of a bankruptcy petition creates a bankruptcy estate. 11 U.S.C. § 541 of the Bankruptcy Code provides what constitutes property of the bankruptcy estate. It is this estate, or pool of assets, that is used to satisfy the claims of creditors. § 541 (a)(1) provides that all legal and equitable interests of the debtor in property as of the commencement of a bankruptcy case creates an "estate."
11 U.S.C. § 541(a)(5) further provides
“Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date –
(A) by bequest, devise, or inheritance;
Federal Rule of Bankruptcy Procedure 1007 requires that debtors file a supplemental schedule disclosing any assets acquired postpetition that fall under § 541(a)(5) “within 14 days after the information comes to the debtor’s knowledge or within such further time the court may allow.” Fed. R. Bankr. P. 1007(h).
§ 541 applies to all bankruptcy cases, whether filed under Chapter 7, 11, 12 or 13. Thus, inheritances, bequests of personal property, and devises of real property received within roughly six months of the filing of a bankruptcy petition are considered part of the bankruptcy estate. For consumer debtors, this is relevant mainly in Chapter 7 liquidation cases and Chapter 13 reorganization cases. For Chapter 7 debtors, once the 180-day period has passed, they are generally safe to receive an inheritance without it becoming part of the bankruptcy estate.The experienced South Florida defense attorneys at Loan Lawyers are here to review a difficult financial situation to assess all of your available options. To schedule a free consultation at any of our three conveniently located offices, contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).