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Will We Be Able to Keep An Inheritance in Bankruptcy? – Jeff

“Dear Steve,

Due to business going bad, serious health problems that has prevented me from working regularly, new jobs closing, caregiver to aging parents, death of 3 of our 4 parents in past 2 years, victim of builder fraud, we were forced into bankruptcy chapter 7. Your site has proved helpful to get us over the barrier to just make the decision.

We are about the file our Bankrupcy chapter 7 petition. My wife just learned she will be recieving an inheritance of about $9,000 from her uncle who died October of 2009. We don’t know for sure when she will actually recieve it, it has been in a probate process since his death as he died without a will. Q: This amount will not make a dent in the debt repayment, but our situation is critical, and we could really use this money to help us find a new place to live as we are losing our home WE built ourselves due to my health and not being able to generate a regular income in addition to my wifes. Do you know of any way we can exempt or keep this small inheritance? Our BK attorney says no. Desperately looking for hope.

Thank you,


Dear Jeff,

Let me preface my remarks with the obvious statement, I am not a lawyer. I always advise people to seek legal advice from a licensed attorney in their state. There are so many local and state differences in procedures and the law that local legal advice is always best.

Your question is interesting though. In researching the issue you raised I came across and interesting statement regarding inheritance in a Chapter 7 bankruptcy.

It does not matter that you might not actually receive anything for months or years. The key date is when your loved one passed away. In a Chapter 7 case, if the inheritance came in the first 180 days after your case was filed, it will go to the trustee, absent any exemptions that might protect all or part of it. – Source

Based on that statement and that 180 days has already expired since the death of the uncle, then the inheritance may be exempt from the bankruptcy.

Here is another reference that appears to confirm the 180 day rule from death, “The bankruptcy law calculates the 180 days from the date of death of the person granting the inheritance.” – Source

If you do inherit within 180 days of filing for bankruptcy, you must disclose the asset(s) to the court and trustee by amending the filing. It is irrelevant when you are actually due to collect the inheritance, whether months or years. The date that matters is the date the decedent passed away. – Source

Based on the information I found it might be worth going back to your attorney and asking the question again but letting them know the uncle passed away more than 180 days ago. If the attorney still says it may become part of the bankruptcy filing then the prudent thing to do would be to get a second opinion from another local bankruptcy attorney.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Barbara

    Jeff, your situation is similar to what I am facing — I am also expecting to inherit money from my deceased mother’s estate and am dealing with how this will be considered when I file for Chapter 7.  I agree with Steve 100% that you must consult with one, preferably two, bankruptcy attorneys to get proper advice.

    While it doesn’t substitute for advice from a qualified attorney, a helpful resource is the free legal advice at  An excellent book on chapter 7 bankruptcy published by Nolo is How To File For Chapter 7 Bankruptcy.  This doesn’t substitute for a good attorney, but is an excellent resource to help educate yourself about the process.  You can often find it in a library, even checking it out through interlibrary loan if necessary.   It is also available online new or used for less than the retail price — search amazon or other booksellers.

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