Avoiding problems AFTER discharge....Any suggestions?

[EandGWZ]

I am aware that while filing and awaiting discharge the proceeds of events such as winning the lottery, getting a HUGE raise or receiving an inheritance may be appropriated to your creditors, makes sense. However, after being granted a discharge is there a time frame where experiencing one of these events would put you in a situation to have a lawsuit filed against you? For example, say I won the lottery today, what would happen?

[LadyInTheRed]

If you win the lottery today and you purchased the ticket after you filed your bankruptcy petition and did not use assets of the BK estate to buy the ticket, the winnings are yours. If you get a huge raise that you did not know you were getting at the time you filed, you can keep every penny, even if you get the raise before your discharge.

If you file a Chap 7 and become entitled to an inheritance or marital settlement within 6 months after you file, any part of the the inheritance or settlement that you cannot exempt becomes part of the bankruptcy estate and can be collected by the trustee and distributed to creditors.

The relevant law is Bankruptcy Code Section 541(a)(5): http://www.law.cornell.edu/uscode/text/11/541

[EandGWZ]

Thanks LadyInTheRed!

[LadyInTheRed]

Thanks LadyInTheRed!

LOL. That red is slowing fading.

[ksgirl38]

If you win the lottery today and you purchased the ticket after you filed your bankruptcy petition and did not use assets of the BK estate to buy the ticket, the winnings are yours. If you get a huge raise that you did not know you were getting at the time you filed, you can keep every penny, even if you get the raise before your discharge.

If you file a Chap 7 and become entitled to an inheritance or marital settlement within 6 months after you file, any part of the the inheritance or settlement that you cannot exempt becomes part of the bankruptcy estate and can be collected by the trustee and distributed to creditors.

The relevant law is Bankruptcy Code Section 541(a)(5): http://www.law.cornell.edu/uscode/text/11/541

Actually I was told that if you win the lottery within 6 months of filing that the court has the right to come after that money to pay your debts. Same goes for inheritance. I remember because I asked this as a joke and then at the hearing the trustee brought it up. I thought that was strange. The raise would be yours to keep.

[justbroke]

Actually I was told that if you win the lottery within 6 months of filing that the court has the right to come after that money to pay your debts. Same goes for inheritance. I remember because I asked this as a joke and then at the hearing the trustee brought it up. I thought that was strange. The raise would be yours to keep.

You were told wrong. If it was a bankruptcy attorney that said that lottery winnings within 180 days after filing are property of the Estate, I would be very frightened! The bankruptcy law is very clear and very explicit on what is property of the bankruptcy estate.

The bankruptcy code (11 USC 541(a)) is very explicit and no where is there anything about a windfall or lottery or any other property coming into your hands unless it was bequeathed, some death benefit, or property from a dissolution of marriage which all occurred within 180 days of filing (period).

Also, never believe anything you read on the Internet unless it comes with citations.

[ksgirl38]

You were told wrong. If it was a bankruptcy attorney that said that lottery winnings within 180 days after filing are property of the Estate, I would be very frightened! The bankruptcy law is very clear and very explicit on what is property of the bankruptcy estate.

The bankruptcy code (11 USC 541(a)) is very explicit and no where is there anything about a windfall or lottery or any other property coming into your hands unless it was bequeathed, some death benefit, or property from a dissolution of marriage which all occurred within 180 days of filing (period).

Also, never believe anything you read on the Internet unless it comes with citations.

Yes, it was an attorney and I was asked the same by the trustee.

[justbroke]

Yes, it was an attorney and I was asked the same by the trustee.

Well... then two clueless attorneys. (Unless there was a misunderstanding and they said that a lottery winning would NOT need to be reported, but an inheritance, divorce or death benefit DOES need to be reported.)

[HHM]

There are only 2 "look forward" aspects of a chapter 7 bankruptcy (and it is fairly cruel and insulting) is if someone dies within 180 days of the date you filed BK and leaves you something. The other, as has already been mentioned is property received by way of dissolution of marriage. The later one is rare since bankruptcy becomes part of the overall plan of the divorce.

[EandGWZ]

Actually I was told that if you win the lottery within 6 months of filing that the court has the right to come after that money to pay your debts. Same goes for inheritance. I remember because I asked this as a joke and then at the hearing the trustee brought it up. I thought that was strange. The raise would be yours to keep.

Let's face it, none of us are going to win the lottery and I hope we aren't trying to . Nonetheless, my trustee told me the same thing as was reported to gsgirl...my overriding concern was inheritances which everyone here agrees are fair game up to 6 months of filing. Correct?

[justbroke]

Inheritances (bestowed, bequeathed, by demise) that you become entitled up to 180 days after filing, are treated as though they were property of the estate on the day of filing. In other words, inheritances are fair game until 6 months after filing. You do not actually need to be "paid" or the right to payment "determined" within the 180 days. You only need to be "entitled" to receive the inheritance within the 180 days.

As morbid as it is, if you file and then on day 179 your relative dies... you may be entitled to something as part of a will or some probate action. It does not matter that the entitlement isn't determined until months or years later. It is purely the fact that you (potentially) became entitled to something on day 179.

I agree with HHM as this is the most sadistic part of the code. Basically, sorry about your mom, now give us "her" money.

[LadyInTheRed]

Also, never believe anything you read on the Internet unless it comes with citations.

Exactly. If you search the internet for an answer to this question, you will find plenty of people lumping lottery winnings in with inheritances in Chap 7. But, there is nothing in the law to support that. If anybody is lucky enough to win the lottery and has an attorney who tells them they have to turn over lottery winnings from a lottery ticket purchased after filing Chap 7 with income earned after filing, ask for a citation to the actual law supporting that position. It is true that if you win the lottery while in Chap 13, it would be income that you would probably have to pay to the trustee. But, that is a completely different situation.

Here's the actual text to the law that I linked to above. It is part of the list of assets that are part of the BK estate:

(5) Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date—
(A) by bequest, devise, or inheritance;
(B) as a result of a property settlement agreement with the debtor’s spouse, or of an interlocutory or final divorce decree; or
(C) as a beneficiary of a life insurance policy or of a death benefit plan.

It's very specific. It doesn't make any "windfall" received in the 6 months after filing an asset of the BK estate.

[EandGWZ]

Thanks for the advice folks as well as the documentation to support it.