I got a cash gift before my Chapter 7 case closed. Can the bankruptcy trustee take it?

For the most part, cash gifts you receive after filing for Chapter 7 bankruptcy are yours to keep. Learn the details.

Question

If I get a cash gift after I file for Chapter 7 but before the case closes, can the bankruptcy trustee take it?

Answer

If someone who isn’t under any obligation to give you anything gives you a gift after you file for bankruptcy, it will be yours to keep. By contrast, a Chapter 7 trustee could take a cash gift you received after you filed for bankruptcy if you became entitled to receive it before you filed the case.

You can learn how Chapter 7 works in A Chapter 7 Bankruptcy Overview.

Most Assets Acquired After a Chapter 7 Filing Belong to You

The general rule is that anything you earn or acquire after you file for Chapter 7 bankruptcy is yours to keep and doesn’t become part of the bankruptcy estate. So, if you’re given a birthday gift a month after you file, you won’t need to worry that the trustee will take it (unless there’s some concern about bankruptcy fraud).

Exceptions to the Rule

Under the bankruptcy law, there are certain things that the Chapter 7 trustee can take even if you acquire them or become entitled to acquire them within 180 days after you file your bankruptcy case. These include:

  • inheritances (see Inheritances in Chapter 7 Bankruptcy)
  • property settlements in divorces case (even if the case isn’t over), and
  • life insurance or other death benefit plan proceeds.

Of course, a filer doesn’t give up property that’s covered by an exemption. If your state exemptions would have protected any of the property above, and you claimed the exemption when filling out your bankruptcy paperwork or amended your schedules to claim the item as exempt, you’d be able to keep it.

Property You Own Before Bankruptcy But Receive Afterward

If you own property before filing for bankruptcy but don’t receive it until after you file, it will be part of the bankruptcy estate. You’ll have to be able to protect it with an exemption to keep it.

Some examples of things that you might receive after bankruptcy and still might not be able to keep include:

  • tax refunds due for the prior year
  • a recovery on an accident that occurred before you filed
  • an inheritance from someone who died before you filed
  • a breach of contract claim that took place before bankruptcy, and
  • money owed to you from a date before you filed for bankruptcy even though it wasn't payable until after you filed.

Find related information about bankruptcy trustee powers and duties and bankruptcy trustee compensation.

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