What happens if I make a lot of money after filing for bankruptcy, can the bankruptcy court take it?
Bankruptcy will wipe away credit card debt, medical bills and many other types of debt, however, there is a catch. In order to be eligible for bankruptcy relief, you must agree to give the court temporary oversight over your assets. The minute a bankruptcy case is filed, an estate is created which includes all the property of the debtor. With the help of your attorney, you will divide the estate into assets that are exempt (which you will keep) and those that are considered nonexempt (which may be subject to sale). As a practical matter, most people are able to keep all of their property through the bankruptcy process. But what happens to the property acquired after filing for bankruptcy?
After-acquired property, inheritance and the 180 day rule
If you file for bankruptcy, shed your debts and become a huge success, can the bankruptcy court take your future earnings as payment for the debts that you’ve discharged? As a general rule, no they cannot. When your bankruptcy case closes you are given the opportunity to move forward free from the burdens of your past debts and with no legal obligation to repay them. The bankruptcy estate consists of all of the property that you own on the date you file. If you win the lottery a year after filing for bankruptcy, you will be entitled to your winnings free and clear. However, it is important to point out that property acquired within 180 days of filing for bankruptcy becomes part of the estate. An exemption may apply, but the trustee will have a say as to what happens to the property you acquire within 180 days of filing for bankruptcy. The rule is often applicable in inheritance situations. Let’s say for example that you file for bankruptcy on February 1. Sadly, your Grandmother passes away four months later and leaves you a large inheritance. Even though your case may be closed, the money you receive will become part of your bankruptcy estate because it was received within 180 days of filing for bankruptcy.
Tell your attorney everything
Bankruptcy can be expensive, make your attorney earn his or her fee. Part of his job is to help you protect property. Tell him everything. Tell him about everything you own, all of your debts, assets that you’ve sold, assets that you may be entitled to. Without information, a bankruptcy attorney is at a disadvantage. With good information, there is the ability to create a plan that fits within the rules of the code.