When Can a Bankruptcy Trustee Take My Inherited Property?

You may have recently become entitled to a property or asset that your deceased loved one left behind for you. This may be a great help if you are experiencing financial struggles, but perhaps not enough to completely avoid the need for a bankruptcy filing. Further, this may become an exponentially tricky situation if you fear that you will lose this inheritance altogether to the consumer bankruptcy process. Well, for more information, please follow along to find out when your bankruptcy trustee might be allowed to take your inherited property and how a proficient Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you explore legal options that may protect it from this fate.

Under what circumstances can a bankruptcy trustee take my inherited property?

First of all, a Kentucky Bankruptcy Court may authorize your appointed bankruptcy trustee to take any property and assets that are placed in the bankruptcy estate. Now, there is no black-and-white answer when it comes to how inherited property is categorized. Rather, it heavily depends on the timing of when you became entitled to this inheritance. Specifically, if you acquired the property within 180 days of your consumer bankruptcy filing date, it may become a part of the bankruptcy estate. Please note that this acquisition date is typically your loved one’s death date, which is distinct from the probate’s closing date or your reception date.

Being in the bankruptcy estate means that your trustee can use it to pay off the remaining debts you owe to eligible creditors. For example, inherited cash may be transferred directly to these creditors, and real estate property may be subject to a sale. Notably, though, if your inheritance is specifically life insurance proceeds, you may qualify for a bankruptcy exemption under Kentucky’s laws. But, nonetheless, it is best to double-check with your hired lawyer before assuming such.

Is it better to delay filing for bankruptcy if I expect an inheritance soon?

Having the 180-day rule in mind, one strategy you may consider is to hold off on filing a bankruptcy petition for another six months or longer. That way, you may use your inherited funds to pay down your debts independently, without intervention by the Kentucky Bankruptcy Court, and subsequently, an appointed bankruptcy trustee. With this move, though, you must remember that you are simultaneously delaying the court’s protection via an automatic stay. This means that your creditors may continue to pursue collection activities against you (i.e., lawsuits, garnishments, liens, etc.), which still leaves the potential of having your inherited property taken away at some capacity.

Also, when it comes to timing out your filing date, you must remain compliant with bankruptcy law. That is, you do not want to give the court any reason to believe that you are attempting to deprive your owed creditors of their rightful payments. Otherwise, they may accuse you of and charge you with bankruptcy fraud. To conclude, there is no shame in asking for help, especially when you are dealing with something as serious as a legal matter that could affect your physical, emotional, and financial well-being. So please retain legal assistance from a talented Louisville, Kentucky consumer bankruptcy lawyer from Schwartz Bankruptcy Law Center. We will happily lend a hand.