What can I do with inherited property?
There are situations that arise where a potential debtor inherits property. Let’s say for example, a house is inherited that is worth 200,000 and its devised in the will to all four surviving children so each child has a 25% interest/$50,000 interest in the property.
The first issue to determine is who resides on the property. If the debtor is living in the property than it can be exempted as homestead. If another relative is living in the property and the debtor has another residence, then the trustee does have an interest in the debtor’s proportionate share.
Typically, the trustee will try to have the other owners buy out the debtor’s portion. In this case, the trustee would likely try to see if the other three siblings could put in 50K to buy out the debtor. They would have to figure out how to finance or fund that $50,000 on their own to pay the trustee.
If those three siblings did not have the financial ability to provide those funds to the trustee, the trustee would have the option to sell the property and distribute the proceeds. It is usually best to resolve these issues prior to filing your bankruptcy.
If you do receive an inheritance six months after filing your bankruptcy case then you are obligated to notify the trustee. Anything that is inherited (personal property, jewelry, real estate, liquid cash and/or stocks) would have to be turned over to the trustee.
If the inheritance is more than the amount of your unsecured debt, then you would receive the balance of proceeds. The trustee cannot take more than you owe your creditors (less a small trustee fee to administer the case).