Can bankruptcy court take property or money received from the sale of property which was inherited after Chapter 13 was filed?

Answer 1

A chapter 13 is debt consolidation. Any monies would be exempt, unless your filing (or state statutes) stipulates differently. There may be a disclosure clause in the documents. Check them carefully or better consult the attorney who did your filing. Better "safe than sorry".

Yes, the Court normally can take possession of the property and/or sale proceeds, at least that is the position of most courts in Indiana. Perhaps in your jurisdiction it is different, but I wouldn't spend the money until you talk to your attorney. What's worse is that when the court takes the money, it doesn't get applied to your Plan base but rather first gets applied to the percentage of debt which is not scheduled to be paid.

For example, say your Chapter 13 Plan is set up to pay 10% of your unsecured debt (with the other 90% getting discharged). If you inherit $10,000.00, the Court will first apply the $10,000.00 to the 90% not getting paid (so that your Plan payment amount and duration don't even change unless the amount you inherit is enough to pay more than the 90% not getting paid). In this way, the court changes your 10% payout into maybe a 25% payout. So, if your Plan base (i.e. the total amount you are paying into your Chapter 13 plan) is $20,000.00 and you inherit $20,000.00, don't think that if the court takes it you'll be paid in full - it only goes toward your Plan base AFTER the debt which was scheduled to be discharged is paid in full.

These results may only be typical in Indiana, so ask your attorney. Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person.

Additional Information

Bankruptcy is governed by the federal law found in Title 11 of the United States Code. As federal law, it supercedes any conflicting state law by reason of the Supremacy Clause of the Constitution. With the exception of exemptions it is the same from state to state. You can read more about it at the link below.