When a person files bankruptcy, they have to disclose all of their assets. Exemptions can be applied to these assets in order to exempt them from the bankruptcy estate. In this way, debtors are able to file bankruptcy, receive a discharge, and protect part or all of their property from being liquidated for the benefit of their creditors. As a general rule, trustees look at what assets are owned by the debtors when they file their bankruptcy case. Assets acquired after filing bankruptcy are not included as part of the bankruptcy estate, if the debtor was not entitled to receive the asset prior to filing. There is an exception to this rule.
In some cases, assets to which a debtor becomes entitled to within 180 days after filing bankruptcy become property of the bankruptcy estate. If a debtor becomes entitled to an inheritance, bequest, or devise, property as a result of a property settlement agreement with the debtor’s spouse or of an interlocutory or final decree, or as a beneficiary of a life insurance policy or of a death benefit plan, that property is part of the bankruptcy estate, and as such may need to be turned over to the trustee. Before filing bankruptcy, a debtor should consider whether they may become entitled to receive a financial windfall in the near future, and consult with a bankruptcy attorney about how this affects their bankruptcy case.