It is not uncommon for people who file for Bankruptcy to receive an inheritance either during their Bankruptcy case or shortly after their case is over. Is the inheritance part of the Bankruptcy estate and can the Trustee take the inheritance? In either a Chapter 7 or Chapter 13 case, if your relative passed away prior to the filing of the Bankruptcy case and left you property or money, it is generally property of the estate and must be disclosed in your schedules just like any other property. It does not matter that you do not have the money in hand at the time of filing. You may be able to use your exemptions to protect some or all of the inheritance. If you file a Chapter 7 case, and you become entitled to an inheritance after you file, it will be property of the Bankruptcy estate if you become entitled to the inheritance within 180 days (or about six months) after the filing date, even if your Chapter 7 case has been discharged and closed. There is a continuing duty to notify the Trustee or amend the Schedules to include the inheritance. Please keep in mind that just because you receive an inheritance does not mean the Trustee will open your case and take the money. Unless it is for a significant amount of money (perhaps several thousand dollars), the Trustee may choose to not take the funds as it would cost more to keep the case open than it is worth.
If you are in a Chapter 13 case and become entitled to an inheritance during your case, the funds become property of your Chapter 13 estate. The Chapter 13 Plan will generally have to be amended to account for the additional income. Of course, depending on the amount of the inheritance it might be a good idea to dismiss the Chapter 13 case and pay off the debt yourself. In other cases, it may be more advantageous to convert the case to a Chapter 7 if the inherited funds would not be part of the Chapter 7 Bankruptcy estate. If the situation comes up, it is definitely something to discuss with your Bankruptcy lawyer immediately after you learn of the inheritance.
Can you waive or disclaim your inheritance so the money goes to other relatives instead of your creditors? There is authority in some states that says you can do just that, if it is done properly and strictly in accordance with state law. In those cases, the inheritance is treated as if it never happened and, therefore, is not property of the Bankruptcy estate. However, a scheme to waive the inheritance with the intent to get it back from other relatives would be fraudulent and a possible federal crime. Again, this is a situation in which you need to immediately see a very good Bankruptcy lawyer who knows state law on this subject.