After going through the process of filing for bankruptcy, you may have hoped that all of your concerns have been appropriately addressed. However, what happens if you receive a large settlement after you filed for bankruptcy? If you get money from an insurance policy or a lawsuit, it’s important to realize that this money may not be yours. Whether or not it is classified as part of your bankruptcy estate has to do with when the cause of action or claim arose, the type of settlement that was received, and whether you filed for Chapter 13 or Chapter 7 bankruptcy.
Chapter 7 vs. Chapter 13 bankruptcy
When you file for Chapter 13 bankruptcy, the property of your estate inside that bankruptcy includes any property or settlements that are acquired during the full period of your case, which can be as long as 5 years. However, the Chapter 13 trustee cannot take assets to pay your creditors. You are responsible for paying your unsecured creditors in an amount considered equal to the value of any non-exempt assets. As it relates to Chapter 7 bankruptcy, practically all property that you owned becomes the property of the bankruptcy estate. Unless you can exempt an asset under existing rules, the bankruptcy trustee is well within the rights to take it and use it to pay your creditors.
In addition to these tangible assets, estate property includes equitable claims and legal claims that you have at the time of filing your bankruptcy case. Some of these may also be included if you become able to receive them within 180 days of the initial filing date. Any legal claims and causes of actions need to be listed at the outset of filing for bankruptcy. Your settlement proceeds could be considered property of the bankruptcy estate and you should always verify what is most accurate in your individual situation by setting aside time to talk with an attorney in advance.
Schedule a Consultation With a New Jersey Bankruptcy Attorney
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.