Converting to ch 7 - inheritance question

[fluffy]

Everything I've read said that when you file chapter 7, if you get an inheritance within 180 days, it goes to the creditors.

Here is my situation. In year 3 of a 5 year chapter 13. Inheriting a sizable estate (it's all real estate, no cash) in the very near future (father just died, but without a will, has not gone through probate yet). I only owe $4,500 on the chapter 13, but have over $40K in unsecured debt in the plan that was not indicated to be paid back.

Attorney said I needed to pay off the $4,500 before I inherit the property - but I don't have the cash to pay it off. She suggested I convert to chapter 7. I go in tomorrow to talk in person and get more questions answered, but thought I would find out what I could here first so I know what to ask.

My biggest question right now... when converting to chapter 7 from 13 - do they use the 180 days inheritance thing? Or is it from the date of the original filing (which was 3 years ago).

[despritfreya]

You need to meet with your attny and decide if "quietly" converting the case is the way to go.

When you convert a 13 to a 7, property of the estate remains whatever it was as of your original filing date. Since the death of your father (my condolences) happened more than 6 months after your initial filing date, the inheritance would not be property of the estate if you convert in "good faith".

HOWEVER, if the conversion is found to be in "bad faith" then all after acquired property (between the filing date and the conversion date plus 180 days after conversion for inheritances and other things) would be property of the estate.

The problem you face in "playing the game" is that if the Trustee asks the right questions at the 341 meeting you must tell the truth. If he discovers that you converted because of the inheritance he could seek to have the conversion deemed to be done in "bad faith".

A second issue to look at is whether or not the inheritance even needs to be reported in the Chapter 13. The answer to this will depend upon case law in your district. Some courts have determined that after acquired property - received after the Plan is Confirmed - is not property of the estate. Others have said just the opposite.

A third issue, raised by your attny, is simply paying off the Plan early. In many jurisdictions, if you were a below median income filer where your commitment period is 36 months, you can pay off the Plan early as long as it is after the 36th month. You would just pay the balance of the remaining payments to the Trustee in one lump sum and he would be obligated to close the case - no questions asked. Now, if you were an above median income filer your commitment period would be 60 months and you would not be able to get out early unless you paid 100% of all allowed claims.

As you can see, this is not an easy issue. If you go the 7 route, you may be walking a fine line between good and bad faith. If you stay in the 13, disclosure depends upon case law in your district. You really need to sit down with your attny and go over ALL of the issues and potential pitfalls.

Des.

[justbroke]

I couldn't have said it any better than Des. In fact, I would have missed most points. The key for conversion will be whether the conversion is in good faith.

[fluffy]

If it's any help with the "good faith" - I do not exactly know that I will inherit anything. While my dad did not have a will, he had gone to an attorney and told her what his wishes were - he just died before he could sign them. The attorney said, that as long as we all agree (there are 4 immediate relatives) we can have my dad's wishes followed. She wouldn't tell us what was in the will she drew up until after he died - and now that he has died, we haven't asked (we don't live in the same town). So, for all I know, I'm not getting anything at all.

I am on month 39 of a 60 month plan - at one point, I did have the option of making my payments bigger and ending it sooner (wish I had done that now!) - but I have a feeling my income is above the median income. Though, maybe not if it just goes by my income - while married, only I filed for bankruptcy - my husband did not. But our combined incomes are way too high for how poor I feel.

I do have an appointment tomorrow with my attorney, so will bring up all these issues. Thanks for the help!