Within your loved one’s Last Will and Testament, they might have named you as one of their beneficiaries set to receive a significant inheritance at the time of their unfortunate passing. While obtaining a great deal of assets or funds might be great news in any other scenario, it may be dampened by the fact that your loved one is no longer around. What’s worse is if this comes at a time when you are in the midst of bankruptcy proceedings, as these assets or funds may be jeopardized altogether. With that being said, please continue reading to learn whether there are ways to protect your inheritance during your bankruptcy case and how an experienced Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you adopt strategies to do so.
How can I protect my inheritance during my bankruptcy case?
Your initial temptation may be to keep your recently earned inheritance hidden from your ongoing bankruptcy proceedings. But nonetheless, it is required of you to report this to your appointed bankruptcy trustee. From here, they may incorporate these inherited assets into your overall bankruptcy estate, and liquidate them to pay back creditors (i.e., Chapter 7) or amend your repayment plan so that you pay back your creditors in higher amounts (i.e., Chapter 13).
However, there are legal ways in which you may prevent your trustee from taking any of these actions. One way is by petitioning for a bankruptcy exemption to apply to your inheritance. While Kentucky does not have a state-specific exemption for inheritances, you may attempt to claim a wildcard exemption. Of note, you may use up to $13,950 of a wildcard exemption if you do not own real estate property and thereby need not opt for the homestead exemption. Also, you may gain exemptions for inherited household furnishings, motor vehicles, clothing, jewelry, and more.
It may also help your case if your loved one placed your inheritance in a spendthrift trust rather than simply ordering it in their Last Will and Testament. This is because creditors are barred from touching whatever is placed in this trust type; subsequently, it cannot be incorporated into your overall bankruptcy estate. With this, it is worth mentioning that your loved one may fund a spendthrift trust with more than just cash gifts, but also real estate property, household furnishings, motor vehicles, clothing, jewelry, and more.
Is my non-filing spouse’s inheritance included in my bankruptcy case?
If your spouse is the one who recently came into a significant inheritance, then you might advise you to file for bankruptcy individually rather than jointly. Of course, this is so no long as it makes sense for your given financial situation and the relief you seek. But generally speaking, your spouse’s inheritance may be considered their separate property and therefore excluded from your personal bankruptcy estate.
With this, though, you must ensure that your spouse does not use these funds to purchase your real property on your behalf. This commingling may complicate your bankruptcy case and ultimately end up with you losing this property, particularly in Chapter 7.
In conclusion, if you are ready to declare bankruptcy, please first retain the services of a skilled Louisville, Kentucky consumer bankruptcy lawyer. Our team at Schwartz Bankruptcy Law Center is ready and able to take on your case.
