How Are Windfalls Treated During Bankruptcy?
Hooray, you’ve just won the lottery! Or, more commonly, I’m sorry, your relative passed away—and you’ve inherited a nice chunk of their estate. Your financial problems are over—or are they? The response to bankruptcy can depend on what kind of bankruptcy you filed. Windfalls during bankruptcy can change the course of proceedings, so make sure to contact your Chapter 7 or Chapter 13 bankruptcy attorney in Montgomery County, TX as soon as possible.
In some cases, exceptions may be provided for, so if you’re struggling under severe debt but have a windfall coming soon, get in touch with your attorney. You’ll also need to inform the court shortly thereafter, so that they can decide what is to happen with your bankruptcy windfall in Montgomery County, TX. Here’s a closer look at what to expect.
Chapter 7 bankruptcy
Chapter 7 bankruptcy and windfalls entirely hinge on when you became legally entitled to the asset. If you became entitled to it within six months of filing for bankruptcy, that asset becomes part of the bankruptcy estate and will be in control of the bankruptcy trustee, to be distributed among your creditors.
If your estate satisfies or exceeds your bankruptcy amount, that’s a good thing—the exceeding amount will be returned to you, and you’ll be able to continue your life as planned. If it doesn’t, you’ll have to write that money off to the bankruptcy proceedings.
Chapter 13 bankruptcy
Chapter 13 bankruptcy typically takes place over a longer amount of time—which makes it more possible that you may be subject to a windfall in Montgomery County, TX at that time. In Chapter 13 bankruptcy, the key question is whether this windfall means you have more disposable income that can be diverted to your creditors. There is also a split in the courts as to whether the six-month or 180-day requirement strictly applies.
Just so you know, if you have a very large IRS refund from filing your taxes, the bankruptcy court may seize that as well. It could be covered by an exemption—especially the wild card exemption that Chapter 13 provides—but you should be prepared to surrender some, if not all, of your exemption to the courts when you get it.
Even if it feels like you can’t catch a break, getting a windfall is a good thing. It can enable you to pay off your creditors that much faster, and while you might not be able to start from the nest egg you were hoping for, you can at least get on with your life more quickly.
Consult an attorney about windfalls during Chapter 7 or Chapter 13 bankruptcy in Montgomery County, TX
If you need a Chapter 13 or Chapter 7 bankruptcy attorney in Montgomery County, TX, call James R. Jones, Attorney at Law. Our office can help you throughout your entire bankruptcy claim, whether you’ve received a windfall or are experiencing more typical results. We’ll do our best to help you discharge as many unsecured debts as possible, backed by years of experience in the courtroom. Call today to learn more.
Categorised in: Bankruptcy