If you plan to file Chapter 7 bankruptcy but inherit property from a deceased loved one's estate, it may tempt you to hide the inheritance from your creditors. However, you shouldn't do that. Hire a bankruptcy attorney and take the right steps to protect your inheritance. The attorney needs to look over several important dates, including the date of your loved one's death. The dates play an important role in whether or not you keep your inherited property after bankruptcy. Here's what you shouldn't do to protect your inheritance and what your bankruptcy attorney does instead.
What Shouldn't You Do to Protect Your Inheritance?
No matter how discouraged or desperate you may be to keep your beloved parent's property, you should never do anything drastic to keep it. Bankruptcy proceedings are state and federal cases that can lead to extensive fines and jail time if you withhold information about your financial status. You also lose the ability to discharge your debts. Here's what happens if you do the following things:
Lie About the Inheritance
Most bankruptcy proceedings take 4-6 months to carry out. During this time, you must report every asset, income and property you own or expect to receive to bankruptcy court. If your loved one passed away and left you property 180 days before or 180 days after you filed Chapter 7, you must report it, even if you need to amend your case.
Omitting the inheritance won't do you any good. Your bankruptcy trustee is the person who investigates your case to see if you have hidden assets or funds. If the trustee finds out that you lied on your bankruptcy forms at any time before or after your case ends, they can ask the court to dismiss your case right away. In this case, the trustee informs your creditors who can take you to court and sue you for what you owe them.
Give the Property Away
Hiding your inheritance from creditors and bankruptcy court by "giving" it away to relatives, such as a spouse or children, isn't a good idea either. The bankruptcy trustee can pull up information about your inheritance by checking your loved one's estate through the state.
Your state keeps detailed records for any inheritances, assets or properties individuals have after death. The information passes to the state during probate. Probate information is public knowledge, so your bankruptcy trustee can access it at anytime.
If your trustee sees that you received an inheritance and gave it away to relatives, they can report you to the FBI for bankruptcy fraud. Once the FBI investigates your case, you face multiple fines and possible time in prison.
It's better for you if you let a bankruptcy attorney take over your case.
What Will Your Bankruptcy Attorney Do?
The bankruptcy attorney does several things, including checking when your loved one passed away and when you expect to receive your inheritance. If your loved one passed away more than 180 days before you filed bankruptcy, you may be able to keep all or most of your inherited property.
Your bankruptcy trustee can take or seize your inheritance if you receive it during your bankruptcy filing, or if you received it within 180 days after the court discharged your debt.
It's important that you tell your bankruptcy attorney when you received your inheritance so that they can use the proper exemptions to protect it from creditors. Exemptions are used to protect property and assets that hold a certain value. Even if you receive or expect to receive a substantial amount of property, it may not be worth as much as you think when compared to other properties on the market.
Protecting your inheritance isn't something to take lightly or lie about. If you need legal advice or representation, contact your Chapter 7 bankruptcy attorney today for more about this topic.