All of the debtor’s assets owned at the time of the chapter 7 bankruptcy filing in NJ are part of bankruptcy estate. However, the debtor is permitted to keep all of his bankruptcy estate assets that are exempt under the bankruptcy code. The details of exemptions and how they work are explained in a separate portion of my website.
There is a very limited list as to when a debtor’s right to an asset after the filing, is included in the bankruptcy estate. An inheritance is an asset of the bankruptcy estate, if the decedent passed away prior to the bankruptcy filing or within 180 days after the bankruptcy filing. The time in which the debtor receives the inheritance is irrelevant.
The following is an example as to how this works. Please note that this fact scenario is extremely unlikely. Five months after the bankruptcy filing, the debtor’s relative passes away and leaves him $100,000. The debtor does not receive the funds until 9 months after the decedent’s demise. After the trustee receives notice of the asset, he will likely file a Motion to Reopen the case. Thereafter, when the debtor receives the funds, the trustee will obtain control of the asset and make a distribution to the creditors.
If the person passes away, prior to the bankruptcy filing and the debtor has not yet received the inheritance, the entire inheritance is still part of the bankruptcy estate. If the debtor has a right to a substantial inheritance, prior to the filing, the debtor may not wish to file the chapter 7. Prior to the bankruptcy filing, in New Jersey, the debtor should consider the health of an individual who may leave them an inheritance.
Robert Manchel, who handles chapter 7 and chapter 13 cases in New Jersey, may be reached at 866 535 5655.