Thursday, July 25, 2013
Received Extra Income After Filing Chapter 7
What happens if I receive extra income after filing a Chapter 7 bankruptcy?
Well, as in most things concerning bankruptcy, there is not a clear cut answer.
In a Chapter 7, most assets of the case are viewed as a snap shot. The debtor must list all assets as of the date of filing the Chapter 7 petition with the Clerk of the Bankruptcy Court. If the debtor was entitled to an income stream prior to the filing, then this right would probably be property of the bankruptcy estate, and must be listed regardless of whether or not it was received. In fact, if you simply have the realistic expectation of your income changing after filing, it should be disclosed to the Court. However, as long as the income stream was not foreseen until after filing, it would not be an asset.
Of course, this has exceptions. Most notably, the receipt of an inheritance. In that case, we would have to look at the right to receive an inheritance up to 6 months after filing.
As you might imagine, the Court also does not look kindly upon fraud and bad faith. For example, lets say Mom, that just won the lottery, wanted her daughter to benefit from it, so pre-petition they arranged to sign a lease post-petition for a room in a modest house for $10K per month. I think this is obviously a filing in bad faith. This filing was probably designed to keep creditors from receiving funds, and the debtor had at least the expectation of having the ability to pay a substantial portion of debt owed to creditors.