General Bankruptcy Process

• To understand how an inheritance may affect your Chapter 7 bankruptcy, you need to grasp how bankruptcy works overall. Legally, you lose the rights to your possessions the moment you file a Chapter 7 bankruptcy. Only by claiming an exemption from liquidation can you retain possession of your assets at the conclusion of your case. If you cannot exempt certain assets, the court retains possession after your discharge. The legal term for your property at the time you file bankruptcy is the "bankruptcy estate."
  
  

Entitled to Inheritance When You Filed

• You don't need to actually have an inheritance in order for it to affect your Chapter 7 case. Merely being entitled to an inheritance when you file puts that inheritance at risk. The court considers assets, property or money that you are owed at the time you file bankruptcy to be part of your bankruptcy estate. If you cannot file an exemption to protect that inheritance, you stand to lose it, even if you do not physically possess it yet.
  
  

Received Inheritance After You Filed

• Generally speaking, income you earn after you file bankruptcy is yours to keep. For example, if you get a raise at work, you can generally keep that extra income. However, the window during which the court my reclaim inherited money extends for a full 180 days after you file bankruptcy. This applies to inheritances you become entitled to but do not receive. For example, if your father dies 179 days after you file bankruptcy and you are his only heir, that money becomes part of the bankruptcy estate, even though your rights to it did not appear for almost six months after you filed bankruptcy.
  
  

Inheritance and Your Discharge

• One thing that your inheritance does not affect in your Chapter 7 bankruptcy is your actual discharge. Receiving an inheritance is not legal cause for the court to overturn your bankruptcy discharge. An exception to this rule is if you had knowledge of the inheritance and did not inform the court. As with all bankruptcy fraud, concealment of assets is an offense serious enough for the court to overturn your discharge.