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Receiving large sums of money before or after a bankruptcy

 

Receiving large sums of money before or after a bankruptcy

There may have been an unfortunate event in your life that is causing you to be receiving a large sum of money. Many clients want to wipe out their debt, then receive the money and move forward with their life debt free. There is a saying “If it sounds too good to be too it probably is.” This saying applies in this case. Depending on where the money is coming from and when you become eligible to receive it, chances are that a bankruptcy will not allow you to discharge debt and keep a large sum of money even if you do not physically receive it until after the bankruptcy is filed and even discharged.

Whether or not you expect to receive a large sum of money is a huge consideration if whether the bankruptcy is the best decision for you. The sum of money can come from many things such as tax refunds, life insurance, personal injury claims, etc. If money is received and spent prior to filing, then depending what money was spent on, it may not create an issue.

However if it was owed to you prior to filing and you do not receive it until after filing then it is most likely property of the bankruptcy estate. It was owed to you if you have a right to the money prior to the bankruptcy being filed. For example, January 1, 2013 your entire 2012 tax refund is already owed to you even though you have not filed the taxes yet. If it is received after the bankruptcy case is filed, the trustee likely will take an interest in it and disburse it to your creditors. This is not always the case however. A lot of time and work goes into what the trustee does when there are assets in a case so they may not be interested in it if the amount of money you are going to receive is small.

Another way the sum of money can become a part of the bankruptcy estate is if you become entitled to receive an inheritance within 6 months after the case was filed. You do not have to actually received the money or property within 6 months but the event that gave way to you being entitled to the money occurred within 6 months or 180 days of the bankruptcy case being filed. For example, if a family member dies 2 months after your bankruptcy is filed and you are going to inherited money or property, even if it takes years before you actually receive anything, it is still property of the estate because you became entitled to it within the 180 days after the bankruptcy was filed.


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