Inheriting Money During Bankruptcy: What Happens if You Receive an Inheritance Mid-Case?
Filing for bankruptcy is meant to give you a fresh financial start, but what happens if you’re in the middle of your case and a relative passes away, leaving you money or property? In Mississippi and southwest Tennessee, the law is clear: timing matters, and so does how your case is structured.
The 180-Day Rule and Why It Matters
When you file for bankruptcy, your assets become part of the bankruptcy estate. Under federal law, if you become entitled to an inheritance within 180 days of filing, it’s usually pulled into that estate. What matters is the date of the person’s death, not the day the inheritance ends up in your hands.
In Chapter 7, non-exempt inherited assets can be sold to pay creditors. In Chapter 13, the value of a non-exempt inheritance can raise your monthly payments.
State-Specific Rules in Mississippi and Tennessee
Mississippi has opted out of federal bankruptcy exemptions, meaning you can only use exemptions under state law. For example, Mississippi’s retirement account exemption protects funds in certain qualified plans if you are the participant or named beneficiary.
If the retirement funds came from someone else’s account and you’re not a beneficiary, you likely can’t claim that protection.
What Happens if You Don’t Report It
Inheritance information is hard to hide. Probate records are public, and trustees often hear from executors, relatives, or even the court. Failing to disclose an inheritance can have severe consequences. You could lose your bankruptcy discharge, be ordered to repay the amount (even if it’s spent), or face allegations of bankruptcy fraud. The cost of trying to hide it is almost always higher than being upfront.
How We Can Help You Protect Your Rights
At O’Brien Law Firm, LLC, we understand how frustrating it is to think you might lose an inheritance during bankruptcy. We help clients in Southern Mississippi figure out what’s protected, what’s not, and how to minimize the impact on your case.
If you’ve received or expect to receive an inheritance mid-case, don’t guess your next step. Get legal guidance before you act. Call us at 662-672-7619 or complete our online intake form to discuss your situation and learn your options. The sooner we talk, the more we can do to protect your financial future.
