Bankruptcy and death – two things most of us would rather not think about. Similar to our blog on Bankruptcy and Divorce. It’s not pretty, but it does happen. So, here’s what you need to know.
An estate planning lawyer can help with many things, like preparing your will, helping you make sure you communicate your end-of-life decisions. Most importantly, an estate planning lawyer can help make sure your assets transfer to the person(s) you wish to receive those items after your death.
But what happens if a death also involves bankruptcy?
Situation: You have declared bankruptcy, then get an inheritance
An inheritance after you’ve declared bankruptcy can seem to be a saving grace. But as with bankruptcy and divorce, timing is everything.
When you file for bankruptcy, a bankruptcy estate is created with a trustee to administer your assets. The inheritance can be added to those assets if you are in bankruptcy when your friend or relative passes away.
- Under Chapter 7 bankruptcy, any cash you inherit is added to your total assets to help pay down debt. Property like cars or houses, unless exempt, will be liquidated and added to your estate.
However, any inheritance received more than 180 days after filing will remain your property. Note that the court uses the date of death as the inheritance date, not the date the inheritance is received.
- Under Chapter 13 bankruptcy, the timing of the inheritance may not matter as much. The judge can choose to add your inheritance into your total income, increasing the amounts of your repayments.
Situation: You receive an inheritance from someone who has declared bankruptcy
When a person dies, they can pass their possessions along, but not necessarily their debt. But the inheritance may not end up coming to you if it is required to pay down the deceased’s debt.
- Under Chapter 7 bankruptcy, the deceased’s assets are already under the care of the trustee. Debts will be paid off until the bankruptcy is discharged. Any non-empty remaining property is then passed to the heirs.
An Estate Planning Lawyer or Michigan Bankruptcy Attorney Can Help
If you are in one of the situations described above, an estate planning lawyer or bankruptcy attorney can help you navigate the courts and your options.
We can work with you to discharge your debt or help ensure you receive the inheritance you deserve.
You can also consult with an estate planning lawyer to set up a living trust for your property. In some cases, property in a trust will not be considered part of the bankruptcy estate. Property isn’t just a home or car. It can include family heirlooms and even cash.
Although a trust sounds like something only a very wealthy person might consider, almost anyone can set up a trust to save their heirs from dealing with probate or the additional challenges of bankruptcy after death.
Need help? Contact Michigan Bankruptcy Attorney Stephanie Krane-Boehmer
Stephanie Krane-Boehmer is an expert Michigan bankruptcy attorney and estate planning, lawyer. Stephanie is happy to help you with all your estate planning questions. Although dealing with legal matters can be intimidating, she will put you at ease with her experience, expertise and down-to-earth approach.
We are located in Rochester Hills and serve Oakland, Macomb, Genesee, Lapeer Livingston, and Wayne Counties. We are here to support you through all aspects of your legal proceedings.
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