Money Received After Filing Chapter 7 (What Happens?)

So, you filed for Chapter 7 bankruptcy. Big step, right?

Now you’re wondering: What happens if I get money after I file?

Like, what if a paycheck lands? Or a surprise inheritance shows up? Can you keep it? Or does it go straight to the bankruptcy trustee?

You’re not alone – this question comes up all the time. The short answer: it depends on the type of money, when you get it, and if any exemptions can help protect it.

In this post, we’ll shed some light on what happens to money received after filing Chapter 7.

What Happens To Money You Get After Filing Chapter 7?

Chapter 7 bankruptcy creates what’s called a “bankruptcy estate.” That estate includes almost everything you owned or were entitled to when you filed.

The trustee’s job is to see if any of it can be used to pay creditors.

But after you file Chapter 7, the money you earn going forward is usually yours to keep.

So in simple terms, if the money was connected to something before you filed, the trustee might take it. If it’s tied to something after you filed, it’s generally safe.

Also Read: What can you not do after filing Chapter 7?

Now let’s go over a few specific situations because each one has its own rules:

#1 Paychecks And Wages

If you earned the money before filing, but the actual paycheck lands after, the trustee can usually claim that money.

Why? Because it was technically already yours when you filed – it just hadn’t hit your bank yet.

But! Money earned from your job after you file? That’s yours. 100%. The trustee can’t touch it.

So basically:

• Pre-filing work = potentially up for grabs.
• Post-filing work = safe and yours.

Might feel weird, but it makes sense once you think about it.

#2 Tax Refunds And Stimulus Checks

Tax refunds can get messy because they’re tied to the income you made before filing. Even if you don’t have the refund yet, the trustee may be entitled to it. The same goes for part of the refund if your filing date splits the tax year.

Trustees often prorate refunds based on how much of the year passed before you filed.

Stimulus checks, rebates, or government relief payments can be a little different.

Also Read: Will Filing for Bankruptcy Affect My Tax Return?

Some of them are treated like tax credits, which means they might be seen as part of your bankruptcy estate if the eligibility date was before filing.

Others are considered more like public benefits that you can keep.

So refunds and stimulus money are very case-specific. They’re definitely something to talk through with your attorney before filing.

#3 Inheritance, Life Insurance, And Divorce Settlements

This is where the famous “180-day rule” comes in.

If you become entitled to an inheritance, life insurance payout, or property from a divorce settlement within 180 days after filing, it can be pulled into your bankruptcy case.

The clock starts the day you file, not the day you actually receive the money.

Let’s say your aunt names you in her will, and she passes away three months after you file.

Even if the estate doesn’t pay out right away, the money is still considered part of your bankruptcy estate because you became entitled to it within that 180-day window.

But if something like that happens on day 181 or later, the money is yours to keep. That single day can make all the difference.

#4 Lawsuits And Settlements

Let’s say you’re in the middle of a personal injury lawsuit when you file. Or maybe you get into a car accident after filing and want to sue.

If the incident that led to the lawsuit happened before your bankruptcy, any settlement or award could become part of your bankruptcy estate.

The trustee can use that money to pay off creditors.

It doesn’t matter if you file the lawsuit later, it’s about when the injury or problem happened.

If the incident occurs after you file, you’re good. Any money from that is yours.

But heads up: lawsuit money is complicated. Sometimes parts of it are protected (like money for medical costs), and other parts aren’t. It’s definitely something to discuss with a lawyer if you’re in that boat.

#5 Gifts, Lottery Winnings, And Other Surprises

Sometimes money falls into your lap out of nowhere. Maybe you get a big birthday gift, maybe you scratch off a lottery ticket, or maybe a friend pays you back unexpectedly.

How that’s treated depends on when it happens.

• Gifts or winnings tied to before filing? That money can be part of the estate.
• Gifts or winnings after filing? Those are yours to keep.

Big gifts from family can sometimes raise eyebrows, though, especially if they look like a way to sneak money around the bankruptcy process.

For most people, small gifts and little wins aren’t a problem, but larger amounts can get complicated.

Also Read: Chapter 13 Payment Plan Example

How To Protect Your Money With Exemptions

Here’s the good news: even if something is technically part of your bankruptcy estate, you might still be able to protect it with exemptions.

Exemptions are laws that let you keep certain property, like some of your home equity, household items, retirement funds, and even a portion of cash or wages.

The exact exemptions depend on your state. Some states have generous “wildcard” exemptions that can be used to protect cash or anything else you choose. Others are much stricter.

Here’s where exemptions can come in handy:

• Protecting a tax refund you haven’t received yet
• Holding onto part of a personal injury settlement
• Keeping cash in the bank under a certain limit

But you usually have to claim the exemption when you file. If you don’t list it properly in your paperwork, you might lose out, even if the exemption could have saved that money.

This is one of the biggest reasons it’s worth having an attorney guide you.

Knowing which exemptions to use, and how to apply them, can mean the difference between keeping and losing money.

Final Thoughts

You’ve probably noticed a pattern here: timing is everything.

The date you file your bankruptcy basically draws a hard line. Any money you receive tied to events before that line can be taken by the trustee. Anything that happens after, usually not.

Planning your filing date carefully can make a huge difference.

If you’re expecting a tax refund or a potential settlement, it might make sense to wait (or speed up!) your filing depending on the circumstances.

Talk to someone who knows the ropes before jumping in.