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Inheritance in Bankruptcy

If you are entitled to an inheritance from someone who has recently passed away if you file for bankruptcy the property would become property of the estate. An important note is that you only need to be entitled to the inheritance you don’t actually need to have probated the estate or transferred the property in your name.

In a chapter 7 case if you have an inheritance the Trustee can sell the property that you are entitled to inherit. The Trustee may therefore keep your chapter 7 case open until the property is fully transferred and would become a party in any probate actions. If multiple people are entitled to the inheritance the Trustee would be able to administrate your share. In other words if you and your two siblings inherit a lot of land you would have a 1/3rd interest that the Trustee could attempt to sell. This can be difficult if you do not want your family’s inheritance to be affected by your bankruptcy filing. While the Trustee can’t sell their portion if the property is not severable (divisible) the Trustee can force the sale. In a chapter 13 case you would not need to sell any property but inherited property can affect your plan payment. You would need to pay the liquidation value for the property.

Typically an inheritance is non-exempt but depending on the type of property and your other exemptions you may be able to exempt all or some of the value.

Also, be careful trying to transfer property to other family members. This would be an insider transfer and a Trustee or creditor would have the power to avoid any transfer to an insider within the last two years.

If you have recently inherited property and are thinking of filing bankruptcy please call the experienced attorneys at Fears Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to