Bankruptcy and Inheritance
I may need to declare personal bankruptcy. A consumer proposal is not an option because I do not have a steady income. Right now I have been out of work for 9 months.
I am to receive an inheritance, but I don’t know when it will be coming. It should be straight forward, but you never know…there is property to be sold. I realize that if I receive the inheritance before or within the bankruptcy period before discharge it will be signed to the trustee to pay my debts…makes sense. But if I declare bankruptcy now and am discharged after 9 months and then receive an inheritance, what happens?
If you receive an inheritance while you are an undischarged bankrupt, it is property of your bankruptcy estate, meaning no, you will not be able to receive it. It must be surrendered to the trustee.
Unfortunately, if you fail to disclose the inheritance to your trustee (even if it hasn’t cleared probate Court) you are committing an offence under the Act. If your trustee finds out – and we live in a small world – you may be charged and/or fined. More importantly, the Court could decide to refuse your discharge from bankruptcy which means you would still have to repay all of your debts.
If the inheritance is enough to pay off your debts in full then you may be able to retain some of the money.
If you owe more than you will receive then unfortunately as far as you are concerned, the funds will be lost.
I suggest you go and see your trustee to discuss your options – perhaps you can file a proposal to your creditors that will allow you to keep some portion of the money. You won’t know your alternatives until you meet with your trustee.
You are correct that complete disclosure is necessary. As a result your trustee will have to be notified of this inheritance, and as long as we know that the money is going to come (regardless if it is during the initial 9 months or after) then the money will be paid to the creditors. It would be different if there is any uncertainty (i.e. the party in question hasn’t passed away), but when you are aware that the moneys will be coming then the monies will be lost.