Filing for bankruptcy can bring much-needed relief from overwhelming debt, but many people worry about unexpected changes after their case begins. One common concern is what happens if you inherit money after filing for bankruptcy. In New Jersey, the answer depends on the type of bankruptcy you filed and the timing of the inheritance.

Below is a general overview of how inheritances are treated in bankruptcy and why it’s important to act carefully if this situation arises.

How Bankruptcy Treats Inheritances

When you file for bankruptcy, the court looks at your assets to determine what can be used to repay creditors. An inheritance may be considered an asset, even if you did not know about it at the time you filed. Bankruptcy law requires full financial transparency, and certain inheritances must be disclosed to the court.

The 180-Day Rule Explained

A key rule in bankruptcy cases is the 180-day rule. If you become entitled to an inheritance within 180 days after filing for bankruptcy, it may become part of the bankruptcy estate. This means the funds could be used to pay creditors, depending on the circumstances and available exemptions.

Differences Between Chapter 7 and Chapter 13

In a Chapter 7 bankruptcy, an inheritance received within the 180-day window may be subject to liquidation, unless it is protected by exemptions. In a Chapter 13 bankruptcy, an inheritance may affect your repayment plan. The court could require adjustments to your monthly payments based on the additional funds.

Do You Have to Report an Inheritance?

Yes. If you inherit money after filing for bankruptcy and it falls within the required reporting period, you must notify the bankruptcy trustee. Failing to disclose an inheritance can lead to serious consequences, including dismissal of your case or allegations of bankruptcy fraud.

How Exemptions May Apply

New Jersey allows certain exemptions that may protect some or all of an inheritance, depending on its size and how the funds are structured. Whether exemptions apply can be complex, especially if the inheritance includes property, cash, or trust assets.

Why Legal Guidance Matters

Handling an inheritance during bankruptcy is not always straightforward. At Carroll Law Firm, P.C., we can provide legal assistance to the New Jersey public and help you understand how an inheritance may impact your bankruptcy case. Proper guidance can help you protect your interests while remaining compliant with bankruptcy laws.