Inheritances In Bankruptcy

Hardly anyone ever thinks about the possibility of losing an inheritance in bankruptcy. This is possibly due to the fact that we are usually not expecting a loved one to die. But, of course, it can happen, and when it does, a loss of an inheritance to creditors only makes matters worse. Without the help of an experienced bankruptcy attorney, you could lose your inheritance in either of the two kinds of Consumer Bankruptcy — Chapter 7 or Chapter 13.

Chapter 7 Cases

If someone dies within 180 days after you file a chapter 7 bankruptcy petition, and, as a result, you receive a right to inherit money or property (including life insurance proceeds), the chapter 7 trustee will take your inheritance from you, and pay it to your creditors. However, under current Missouri exemption laws, you can keep up to $15,000 of life insurance proceeds for actual funeral, cremation or burial expenses, if the deceased is your spouse, child or parent.

Chapter 13 Cases

If you inherit money or property while you are in chapter 13, the bankruptcy court may require you to increase your payout to creditors by an equal amount, thus, transferring your inheritance to them.


To make sure you do not lose part or all of any inheritance, you must make sure you do not inherit anything too soon. If you are a named beneficiary of a will or life insurance policy (this includes your spouse), have them change the beneficiary designation, until enough time has passed. If someone you are likely to inherit from does not have a will, you might suggest that he or she make a will, naming someone else as beneficiary for the time being. Then, when it is safe to do so, change the designation, naming you as beneficiary.

Before you file for bankruptcy, you should seek step-by-step guidance from a bankruptcy attorney on this issue.

The screen is still too small but the good thing is that it is slimmer