Is Your Inheritance at Risk During Bankruptcy?
Filing for bankruptcy can be a life-changing decision that helps you eliminate overwhelming debt and regain financial control. But if you’ve recently inherited or expect to inherit money or property, you may be wondering: “Will I lose my inheritance during bankruptcy?”
For Maryland residents, the answer depends on several factors—including the type of bankruptcy you file, the timing of your inheritance, and how state exemptions apply. In this article, we’ll break down how inheritances are treated in bankruptcy cases, so you can make informed decisions about protecting your financial future.
Answering the Question: Is Your Inheritance at Risk During Bankruptcy?
18o-Day Inheritance Rule
One of the most important rules to understand is the 180-day rule.
Under the U.S. Bankruptcy Code, if you become entitled to an inheritance (either money, property, or other assets) within 180 days of filing for bankruptcy, that inheritance becomes part of your bankruptcy estate. This means it can be used to repay creditors—regardless of whether you have actually received it yet.
What does “entitled” mean?
You’re considered entitled to an inheritance the moment the person who left you the asset passes away, not when the estate is distributed. So even if you don’t receive the inheritance until months later, the key factor is when the death occurred in relation to your bankruptcy filing date.
If the inheritance falls after the 180-day window, you usually get to keep it—even during an active bankruptcy.
Chapter 7 vs. Chapter 13 Bankruptcy
The treatment of inheritance also depends on the type of bankruptcy you file.
Chapter 7 (Liquidation Bankruptcy)
In a Chapter 7 case, non-exempt assets—including qualifying inheritances—may be sold by the bankruptcy trustee to repay creditors. If you become entitled to an inheritance within 180 days of filing, the trustee can take it unless it qualifies under an exemption.
If the inheritance arrives after the 180-day mark, it is typically not subject to liquidation, and you can keep it.
Chapter 13 (Reorganization Bankruptcy)
With Chapter 13, you propose a repayment plan to pay back some or all of your debts over 3–5 years. Any inheritance received during that time—even after 180 days—may be considered disposable income that must be included in your repayment plan.
So while Chapter 13 provides more flexibility and protection for your assets, you may be required to use your inheritance to increase your payments to creditors during the life of the plan.
Exemptions Under Maryland Law
Maryland law provides limited exemptions that may help protect some or all of your inheritance during bankruptcy.
Some common Maryland exemptions include:
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Wildcard exemption – Up to $6,000 of any personal property (Md. Code Ann., Cts. & Jud. Proc. § 11-504(f))
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Cash or property of any kind – Up to $5,000 (Md. Code Ann., Cts. & Jud. Proc. § 11-504(b)(5))
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Tools of the trade, household goods, and other essentials may also be protected
If the inheritance comes in the form of life insurance proceeds or certain types of retirement benefits, these may also be protected under specific statutes or federal exemptions.
However, Maryland does not allow the use of federal bankruptcy exemptions, so you’re limited to the state’s own list of exemptions. For this reason, having an experienced Maryland bankruptcy attorney evaluate your situation is essential.
Contact The Law Offices of Nicholas J. Del Pizzo for Assistance With Bankruptcy
At The Law Offices of Nicholas J. Del Pizzo, we know that filing for bankruptcy is a personal and often stressful decision—especially when assets like an inheritance are involved. As a dedicated Baltimore bankruptcy attorney, Nick Del Pizzo offers honest advice and personalized legal strategies to help protect what matters most to you.
When you schedule a consultation with our firm, you meet directly with Nick, not a paralegal or junior associate. We take the time to understand your financial situation, help you choose the right type of bankruptcy, and guide you through each step of the process. Whether you’re dealing with foreclosure, overwhelming debt, or complex asset questions like inheritance, we’re here for you seven days a week.
Don’t risk losing an inheritance or making costly filing mistakes—contact us today to schedule your consultation and take control of your financial future.
