Inheritance During Bankruptcy -- What Happens to Your Inheritance

The 180-Day Rule

Under 11 U.S.C. Section 541(a)(5), if you receive an inheritance within 180 days of filing bankruptcy, it becomes property of the bankruptcy estate. This means:

• The inheritance goes to the trustee unless you can exempt it
• The 180-day window starts on your filing date and runs 180 days forward
• The trigger is the date the person dies, not when you actually receive the money

Protecting an Inheritance

• Exemptions: Some states have exemptions that can protect inherited property (wildcard exemptions, specific inheritance exemptions)
• Chapter 13 timing: In Chapter 13, inherited property during the case becomes estate property under Section 1306, but you may be able to modify your plan to address it
• Spendthrift trusts: If the inheritance is held in a properly drafted spendthrift trust, it may not become part of the bankruptcy estate