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What happens if I inherit money during my bankruptcy?

Like many Florida residents, your financial troubles have led you to the difficult decision of filing for bankruptcy. Discharging most of your debt in a Chapter 7 bankruptcy can take a great weight off your shoulders, but what if you receive an unexpected amount of money during your bankruptcy? Will your inheritance be protected from your creditors?

FindLaw explains the dilemma of bankruptcy and inheritance in further detail. If you have inherited money just prior to filing for bankruptcy or you receive an inheritance within 180 days of your petition, the court will likely liquidate it to repay your creditors. The reason for the six-month window for creditors to have a claim on your inheritance is to prevent people from discharging their debts while knowing they will soon receive a large sum of money.

Ways to protect your inheritance

As much of a relief as it is to unburden yourself from debt, it can be disheartening to lose your inheritance to creditors, especially when you know your relative would have liked you to enjoy the money or use it for something important, such as a college fund or your own retirement. Are there ways you can protect your inheritance while you go through a bankruptcy? If you know you will be receiving an inheritance, you may consider asking your loved one to leave the money to another relative instead – such as a child or grandchild – and have it transferred to you later. You might also request to place your inheritance in a spendthrift trust, which should protect it from your creditors.

Recovering after a bankruptcy

The desire to keep your inheritance out of the hands of your creditors does not mean you are trying to avoid your responsibilities. You have already been through a great deal of financial and emotional strain getting to the point where you needed to seek help. Protecting your inheritance and using it wisely after your bankruptcy are good ways to regain a solid financial footing and avoid future troubles.

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