When it comes to filing bankruptcy in Florida, timing matters. Aside from things like income limits, exemptions, and credit counseling requirements, the timing of your bankruptcy filing can either protect you or put you at risk. Let’s say, your paycheck arrives late. A tax refund hits your account. A family member passes away and leaves you inheritance money. Any of these events can affect how your bankruptcy case unfolds.
The 180-day rule is a bankruptcy provision that determines whether certain benefits or assets obtained within 180 days after filing must be included in your bankruptcy estate. This means if you file for bankruptcy and then receive or inherit certain types of money within the next 180 days (about 6 months), the bankruptcy court may treat that money as if you had it when you filed. This rule most commonly applies to:
- Inheritances
- Life insurance proceeds
- Property settlements from divorce or separation
- Certain trust distributions
If any of these occur within 180 days after your filing date, the assets could potentially be used to repay your creditors. This surprises many filers because they assume only assets owned on the filing date matter. The 180-day rule extends that window, making timing crucial.
How Does the 180-day Rule Affect Chapter 7 vs. Chapter 13?
Chapter 7 bankruptcy: Because Chapter 7 involves, liquidating non-exempt assets, anything covered by the 180-day rule could be taken by the bankruptcy trustee and distributed to creditors. For example, receiving an inheritance three months after filing could mean losing part or all of it.
Chapter 13 bankruptcy: In Chapter 13, you commit to a repayment plan and keep your assets. Assets acquired under the 180-day rule may increase how much you are required to repay over the life of your plan.
What does the 180-day rule not cover?
The 180-day rule does not apply to everything acquired. For example:
- Regular wages earned after filing are generally protected
- Bonuses tied to post-filing work are usually excluded
- Tax refunds depend on when the income was earned, not when the refund arrives
That distinction is why professional guidance matters when it comes to navigating a bankruptcy. If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. To learn more, visit the Kingcade Garcia McMaken website at www.miamibankruptcy.com.