Laconia, NH asked in Bankruptcy for New Hampshire

Q: Question about receiving an inheritance in the middle of chapter 7 bankrupty.

Say I filed chapter 7 and I owe $35,000 in credit card debt. I have no assets at the time that I file. Then three months after filing I inherit $120,000. Does the Trustee pay off your debts and then return to you what is left over? I wouldn't lose all that money if I only owe $35,000? Is that how it works?

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3 Lawyer Answers
W. J. Winterstein Jr.
PREMIUM
W. J. Winterstein Jr.
Answered
  • Bankruptcy Lawyer
  • Boyertown, PA

A: That's the basic result.

Prepare yourself for an increased fee for the bankruptcy Trustee as well, who is entitled to a percentage of amounts collected. The percentage is set by federal statute.

Timothy Denison agrees with this answer

1 user found this answer helpful

William J. Amann
PREMIUM
William J. Amann pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
Answered
  • Bankruptcy Lawyer
  • North Andover, MA
  • Licensed in New Hampshire

A: Before you file Bankruptcy under any chapter, consult competent counsel.

Property of the estate is defined by 11 USC § 541. It includes:

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

by bequest, devise, or inheritance.

11 U.S.C. § 541(a)(5)(A).

Subsections 541(a)(1) and (a)(5)(A) focus on mutually exclusive time periods. Thus, under the express language of subsection 541(a)(1), any legal or equitable interest of the chapter 7 debtor in a bequest as of the commencement of the chapter 7 case IS property of the chapter 7 estate. However, Bankruptcy Code § 541(a)(5)(A), is not implicated unless "the debtor acquires or becomes entitled to acquire" an "interest in property" by bequest "within 180 days after " the date of the commencement of the case (emphasis added). In re Lonstein, 950 F.2d 77 (1st Cir. 1991).

And the analysis is different under a Chapter 13 and 11.

Robert O'Brien and Timothy Denison agree with this answer

Leonard G Deming
Leonard G Deming
Answered
  • Bankruptcy Lawyer
  • Nashua, NH
  • Licensed in New Hampshire

A: I agree with the answers previously given. However, you may want to consider seeking dismissal of the Chapter with the assurance that you will pay the debts now that you have the money. It would save you the fees Attorney Winterstein mentions.

Timothy Denison agrees with this answer

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