Receiving a Windfall While Bankrupt
When we talk about a “windfall”, we are talking about something that you become entitled to after you have filed for personal bankruptcy but before you are discharged from bankruptcy. Examples of a windfall are:
- lottery winnings;
- inheritances; or
- payout on an insurance policy.
Any assets or property that you receive, or become entitled to receive, prior to your discharge from bankruptcy, can be seized by the trustee and distributed to your creditors. As a bankrupt, you have a duty to report any windfalls to the trustee and failure to do so could cause difficulties in obtaining your discharge from bankruptcy or even after you have been discharged.
If a windfall is more than what you owe, your bankruptcy trustee will pay all of your creditors, plus interest at 5%, and then return the surplus amount to you.
If there is a possibility that you may become entitled to an inheritance or insurance payout while you are bankrupt, you should discuss this with the trustee prior to filing. A consumer proposal could be a better option in such a situation. It may also be prudent to discuss your intention to file for bankruptcy with the person who has named you as beneficiary in a will or insurance policy as they may wish to amend their directions pending your discharge from bankruptcy.
Powell Associates Ltd. is a Licensed Insolvency Trustee (LIT) focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses. We offer free consultations to review your personal financial situation and practical debt resolution options. Contact us to discuss your situation over the phone or book an appointment to meet us face-to-face in Saint John, Moncton, Fredericton, Charlottetown or Dartmouth - it's your choice.