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What Happens If I Receive Inheritance When I Am Bankrupt?

May 24, 2012 | Comments: 0 | Views: 242

If you are currently bankrupt we explain what happens if you receive an inheritance payment from a will or trust.

As a bankrupt person, if you receive any kind of windfall, this money must be paid to the official receiver so that it can be distributed to your creditors. An inheritance payment is classed as a windfall.

As such if you are left any money or items of value in a will while you are a bankrupt person, you will have to give these to your official receiver so that any funds realised can be shared between your creditors.

If you are left money in a will which is not paid to you before the date that you are discharged from your bankruptcy, then this payment still forms part of your bankruptcy estate. As such it will have to be paid to your official receiver as an when it is received, even if this is after you have been discharged.

Will the OR allow me to keep any of my inheritance payment?

If you have a particular financial emergency such as vital repairs are required to your home, then you might feel that it would be reasonable to be allowed to keep some of the inheritance you are awarded to pay for this.

The official receiver will almost certainly not allow you to keep any of the payment you receive even in this scenario.

Having said that, if you feel you have a particularly needy case, there is nothing to stop you asking the official receiver if they will allow you to keep some of your inheritance payment. However there is certainly no guarantee that your request will be granted.

It is extremely important that you do not spend any of the inheritance that you receive before telling the OR about it. If you do this it may well be seen as not co-operating fully with the official receiver and the length of your bankruptcy could be extended.

Would receiving an inheritance mean I could be discharged early from bankruptcy?

If the amount you receive as an inheritance payment means that your total debts could be paid in full, then once these funds have been paid to the official receiver it could mean that you are discharged immediately from your bankruptcy.

You may also be required to pay certain costs that have been incurred by the official receiver.

If the amount that you receive is not enough to cover these costs then you may not be discharged and the bankruptcy may continue for its full term.

After discharge you can keep any inheritance you receive?

Once you have been discharged from your bankruptcy, then you are no longer bound by the bankruptcy rules. As such if you receive any kind of windfall payment such as an inheritance once you are discharged, this money will be yours to keep.

Because bankruptcy generally only lasts for just 1 year (12 months) if you feel you might receive an inheritance payment in the near future, bankruptcy might be a better debt solution to chose than an Individual Voluntary Arrangement (IVA).

This is because an IVA will last for 5 years and so there is more chance that your inheritance payment will be caught within the next 5 years by the IVA windfall clause rather than that of bankruptcy which will only capture inheritance you receive for the next 12 months.

After you are discharged from bankruptcy you may still be paying an income payment agreement (IPA). As such if you wish you might be able to negotiate with the official receiver to offer a lump sum payment from your inheritance (which the OR is not entitled to) instead of continuing to make further ongoing IPA payments.

Always speak to the official receiver

If you discover that you are due to receive inheritance before you declare yourself bankrupt the most important thing to remember is that you must always tell the official receiver.

Unless the amount you receive is more that the total debt that you owed before you were declared bankrupt then there is very little chance that you will be able to keep any of the inheritance you are given.

As such whether or not you might shortly be in receipt of an inheritance is one of the important things to consider before deciding to declare yourself bankrupt.

James Falla is an expert debt advisor from For more quality and confidential information on Bankruptcy, click the link. If you would like help declaring bankruptcy in the UK you can visit

Source: EzineArticles
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