Money inherited while in chapter 7

[bobbiestarr]

If I inherit cash and land, with enough cash to pay all my creditors, can i cancel my chapter 7 and just pay everybody???

[LadyInTheRed]

No. You have to petition the court for a dismissal.

Here is one court's opinion denying the request for a dismissal when the debtor received an inheritance after filing: http://www.ianb.uscourts.gov/content..._L._ACHEY.html. In that case, the inheritance was not enough to pay off the creditors. It is possible that the court would have ruled differently if the inheritance were larger. But maybe not. There could be other courts that have ruled differently. And other courts are not required to follow this rulling. But, reading the opinion will help you understand the law related to Chap 7 dismissals.

[bobbiestarr]

thank you, that helps me understand... I just filed chapter 7 last week, and my uncle died yesterday... Not positive I am getting anything, but it's possible I'll get something, if not ALOT???!!! So for now I guess I shouldn't do anything, until I get a letter saying I have inherited something... ??!!!

[OhioFiler]

If you receive an inheritance within 180 days after filing it belongs to the estate.

[tobee43]

lady is correct with this situation. you need to follow the court rules to get the dismissal, or you will find yourself with a problem. find out exactly how to get your case dismissed and you'll be fine. especially, if you have enough money now to pay your creditors. ( can i be adopted by your family?, just asking )

[LadyInTheRed]

thank you, that helps me understand... I just filed chapter 7 last week, and my uncle died yesterday... Not positive I am getting anything, but it's possible I'll get something, if not ALOT???!!! So for now I guess I shouldn't do anything, until I get a letter saying I have inherited something... ??!!!

You should let your attorney know about the possible inheritance. Your petition should probably be amended to include it and exempt any portion of it that you can. What will probably happen is that you'll get your discharge, but your case will remain open until the trustee knows how much the inheritance is and whether to take any non-exempt amount and distribute it to your unsecured creditors. If the inheritance is more than you owe to creditors, the trustee will pay the creditors and you will get what is left.

If the ineheritance is large enough to pay your creditors, you should talk to your attorney about dismissing so you can try to settle your debts. I'm not sure whether it is really worth it. The creditors will know how much you are getting and may prefer to try to collect the entire amount you owe. If they are paid through your bankruptcy, at least interest and penatlies stopped accruing on the date you filed.

[despritfreya]

First, my condolences on your loss. Now to the issue at hand. . .

I doubt very much the Court will grant a Motion to Dismiss. The inheritance is property of the estate, must be disclosed, and, if not subject to an exemption (full or partial) turned over to the Trustee whenever it is received, be it today, tomorrow, 6 months from now or 2 years from now or more.

You need to advise your attorney so that he can properly notify the Trustee.

Des.

[bobbiestarr]

Inheritance more than my debt

What if the cash amount I receive in an inheritance is more than my debt... would the trustee then dismiss my case, since I would have enough money to pay everything... I read the statute, it reads that a dismissal is only grated when it benifits bothe the debtor and the creditor... I guess it's gonna depend on the trustee.

[tobee43]

What if the cash amount I receive in an inheritance is more than my debt... would the trustee then dismiss my case, since I would have enough money to pay everything... I read the statute, it reads that a dismissal is only grated when it benifits bothe the debtor and the creditor... I guess it's gonna depend on the trustee.

i doubt seriously, that other than the amount you own to your creditors no other money is in jeopardy. they cannot take more than what is owned them (any creditor).

des, what if the OP simply paid everyone off now? if OP just filed and there has been no 341 can't something be worked out?

[HHM]

There is practically no chance of dismissal by the trustee. Sorry.

Unfortunately, the triggering event has occurred, the death of the uncle, anything that uncle chose to pass on to you, is now property of the BK, and will be liquidated to pay creditors barring some sort of exemption or elaborate estate planning mechanism (e.g. generation skipping trust).

If you fail to disclose, and the inheritance is found out, you would likely face a denial of discharge and possible criminal prosecution.

[despritfreya]

In response to:

I read the statute, it reads that a dismissal is only grated when it benifits bothe the debtor and the creditor... I guess it's gonna depend on the trustee.

Not entirely correct. The Court must decide what is "in the best interest of the creditors", not both. The problem is that once the Trustee becomes aware of the asset (golden goose), he/she will most likely oppose any attempt to dismiss. Remember, the Trustee makes money off of the asset and if the asset is large enough to pay all allowed claims in full along with the Trustee's fee and the Trustee's attny (if he/she hires one), this will be a "solvent" estate. Whatever is left over after all claims are paid will be returned to OP.

In response to:

What if the OP simply paid everyone off now? if OP just filed and there has been no 341 can't something be worked out?

If OP fails to show up at the 341 the case is likely to be dismissed for failure to appear - assuming the Trustee does not know about the golden goose. Not a bad strategy.

Unless the case is dismissed OP cannot use the inheritance to pay the creditors as it does not belong to him/her.

Des.

[tobee43]

quite a predicament to say the least.

darn if you do and darn if you don't. i would let my atty take the lead on this one and not take any chances then, at all.