519-646-2222Inheritances in bankruptcy
It can happen that people come into an inheritance after
filing for bankruptcy and before the trustee’s discharge. Inheritances in bankruptcy can be great or
unfortunate depending on what is being inherited. Let’s consider some examples.
If a relative were to die and leave you a relatively small amount of money –
not enough to pay off your creditors – you would be required to turn it all
over to your trustee to pay your trustee’s fees and to make a dividend
available to your creditors.
On the other hand, if a relative were to die and leave a huge amount of money you would only be required to pay enough to pay the trustee’s fees and the full amount owed to your creditors (with or without additional interest at 5% per annum).
Now, if your relative changed their will prior to their death your inheritance could be bequeathed to someone else, a sibling or your children – could be a smart move if you have relatives in ill health planning to leave you some money. At least that way the inheritance could stay within the family.
Should a relative or friend leave you some other form of asset, whether that be a vehicle, housewares or whatever, your trustee would have to assess the value and determine if it wold be commercially reasonable to liquidate the asset, sell it back to you for fair market value or abandon it altogether.
If money is placed in a trust and you are only allowed, by the terms of the trust, to access smaller, annual, monthly or weekly, amounts the trustee will count those values as a part of your income and assess you for the payment of surplus income if applicable.
For more detailed information please call the office at 519-646-2222