Bankruptcy is something that affects thousands of Americans each year, including the residents of Glen Carbon, IL. It is a complicated process that has effects on many aspects of the lives of the people going through it. Many may be unaware of the effects that it has on inheritances and estate plans. Here we want to explain more about this process and what effects it can have on your estate plans and inheritances.
It is important to understand the entire process as well as its effects. Bankruptcy is a legal and financial term that means that a person, business, or municipality, has accumulated so much debt that they have to petition the United States Bankruptcy Court to erase their debt for them. The court will rule the petitioner as insolvent, which means that the petitioner is not able to pay their creditors back due to the extent of their debts and not having enough assets to use. The petitioner then has to liquidate all of their assets and set up a repayment plan with the assistance of an economic advisor in order to pay off all of their debts.
When filing for bankruptcy, the person will have to file a petition under one of the chapters of the Bankruptcy Code. Usually, people will file for Chapter 7 which will relieve the debtor through selling their assets in order to pay back their creditors, or chapter 13 which will sometimes allow the debtor to keep some of their property and the payment plan will give the debtor over 3 or 5 years to pay back their creditors. When the debtor meets all of the requirements of their bankruptcy filing, they will get a cour0ordered bankruptcy discharge, replacing them of their obligations to pay their debts. After this, creditors can no longer take collection actions through letters, calls, civil suits, or discharged debts.
How It Affects Inheritances and Estate Plans
Having to file for bankruptcy in Glen Carbon, IL will usually affect inheritances and estate plans. When one files a claim, a bankruptcy estate is created. This estate is controlled and protected by the Bankruptcy Court, and it has its own appointed trustee who will act as administrator for the estate. This estate is set up to be the temporary legal owner of all the debtor’s property and assets. This can even be extended to inheritances received while the debtor remains in bankruptcy.
The effects on inheritances, however, all depend on the chapter that the individual filed under. If you had an estate plan set up with instructions on who your assets will be distributed to upon your death, being in bankruptcy can affect the assets beings distributed. Your debts will have to be paid off before any of your beneficiaries can receive the gifts or inheritances.
If you have any more questions about how bankruptcy affects inheritances or estate plans in Glen Carbon, IL, give our team over at Action Law Center a call today!