Bankruptcy and inheritance

dave3dtg

My other thread diverged into this subject. There was some good input on the subject but more answers needed so thought I'd start a new thread... especially as it might cause some people problems in a world wide pandemic. I also thought the advice given here might help someone else.
So, family of 4 siblings with 1 remaining 83 year old parent.
1 sibling bankrupt for a year. The parent's will to be rewritten, mainly due the recent loss to COVID19 of the other parent but also because of the bankrupt sibling who is to be excluded thus stopping the OR from taking the property. A new will to be written at the end of the bankruptcy should the parent survive the bankruptcy.
If the parent doesn't survive then the 3 siblings state that if the parent's house is sold (which it won't be because 2 want to hold on to it for years to milk as much out of it as possible and 1 wants to live in it for life) then they will split the proceeds in 4 and give the bankrupt the 25%. Thanks to advice on the other thread this action is highly illegal.
The 3 siblings say "oh well, we'll just make an offer to pay off the bankruptcy". Which is fine for them because they're not actually paying it themselves. Correct me if I'm wrong but why would the OR accept a low offer? 
How will the OR know about the death of the parent?
Also how will the OR know that the bankrupt has received the 25%?
If the OR knows that the 25% is 3X the bankruptcy why would the OR accept anything less than the full amount?
The 3 siblings refuse to replace the bankrupt with the bankrupts 2 children which is what the bankrupt wants and believes should happen, if not legally then morally atleast.
Any ideas?

Fighter1986

We aren't going to get into how or whether an OR would know about funds received or how he might or might not know.

Withholding information regarding funds received during bankruptcy is fraud, and illegal. Don't do it. 

Obfuscating the source of funds when making an offer of final settlement is money laundering, and illegal. Don't do it. 

If the 25% inheritance falls short of the total debt included in the bankruptcy, the OR could table an offer in full and final settlement annulling the bankruptcy if the creditors accept. It's not unusual for there to be a meeting of creditors in an instance like this. 

Whatever happens, stay on the clean side of the law. Don't even contemplate anything remotely dubious. The consequences far outweigh the outcome if the worst does happen, and your sibling does lose his or her inheritance to creditors. 

Good luck, I'm sorry for your loss, I hope your living relative pulls through and has a while with us yet, and I hope it doesn't come to having to sacrifice 25% of the inheritance to creditors.

EDIT: If 25% of the inheritance is 3x the amount included in the bankruptcy, that's absolutely marvellous. Your sibling gets her bankruptcy annulled and on top of this gets to keep two thirds of his or her inheritance. 

That's an absolutely marvellous result, financially speaking. One anyone should be very, very grateful for.

Minkym00

Your post contains some misinterpretations Dave3dtg.

The parent can write a will and leave their estate to the 3 siblings and exclude the 4th during the 4th’s period of bankruptcy. They can then change it back after the bankrupt’s sibling’s discharge. There is nothing illegal about this - people can leave their estate to whoever they wish.

If the parent should pass away when the 4th is bankrupt and not a beneficiary then the 3 siblings could, legally, decide to give the 4th a share but it must be AFTER the bankrupt’s discharge. It is only if they give the bankrupt receives any cash during the 12 month bankruptcy period, and the bankrupt doesn’t declare this to the OR, that there is a criminal offence. 

If the parent survives the bankruptcy period and writes a new will to include all 4 siblings then the OR would have NO claim on any future inheritance. 

mwarby

Minkym00 said:

If the parent should pass away when the 4th is bankrupt and not a beneficiary then the 3 siblings could, legally, decide to give the 4th a share but it must be AFTER the bankrupt’s discharge. It is only if they give the bankrupt receives any cash during the 12 month bankruptcy period, and the bankrupt doesn’t declare this to the OR, that there is a criminal offence.

IMHO you'd need to ensure that this is not part of the will, and probably best that its not a written agreement. What would happen is that the bankrupt sibling would receive nothing, once discharged the other siblings could choose to give the other sibling a gift, but they shouldn't be obligated to do so