If you inherit money or property during or after bankruptcy, there could be situations where you might not be able to keep this inheritance. This article answers the question: How does bankruptcy affect inheritance?
I’m receiving an inheritance during my bankruptcy
If you receive an inheritance while bankrupt it is classed as a windfall and will go towards your debts. You are duty bound to inform your bankruptcy trustee of any sums due to you under a will or trust.
If you receive the inheritance just prior to going bankrupt, or during the bankruptcy period and conceal it from the OR then you could be liable to criminal charges which could mean a fine or imprisonment.
If you think you may be the recipient of inheritance during your bankruptcy then get them to change their Will as soon as you can. Don’t rely on relatives outliving your bankruptcy. Talk to them, explain your situation and find a way around it. Perhaps it goes to another relative and eventually comes to you when you are free from your obligations under bankruptcy law.
You would have to list on your bankruptcy any sum that you know you are due to receive or inform the OR as soon as you know you are due to receive it.
Please also bear in mind that any property that comes to you after you have been made bankrupt can be seized by your trustee. This will remain that way until you are discharged. The only income you can keep is that necessary to fund reasonable living expenses.
What If I’m receiving an inheritance after bankruptcy
Your inheritance exists only because a person has died and before that time it was not money that you had any right or entitlement to. If the person died after you were discharged from bankruptcy, then the Official Receiver (OR) has no rights to money, assets or property that you come into after discharge from bankruptcy.
Ultimately, the period in which it is the duty of the bankrupt to notify the trustee of any after-acquired property begins with the date of the bankruptcy order and ends with the date of discharge.
Will this change my IPA?
If you received the inheritance after being discharged and then use this as an investment in something that creates income, you must declare this to the OR. Inheritance can impact your Income Payment Agreement (IPA). It might increase or it may not increase depending on the extra income.
If your income was too low, so you did not have an IPA set, then this can not be changed, as an IPA can’t be applied after being discharged.
Need more assistance?
If you have any doubts about the timing of when this inheritance money became yours then you should contact the Insolvency Service and explain the dates and circumstances and they should be able to let you know if there is any claim.