Bankruptcy 101: Winnings, Gifts, and Inheritance  

Bankruptcy 101: Winnings, Gifts, and Inheritance  

Written by Kale Havervold
Fact-checked by Caitlin Wood
Last Updated April 19, 2018

Bankruptcy is one of the preferred methods for getting out of debt or financially related problems. But, of course, there are some catches. As you are probably aware, a bankruptcy will often cost you almost everything that you own, barring a couple of exceptions, depending on where you live and your unique life situation.

During the bankruptcy process in Canada, your licensed insolvency trustee will need to take possession of all your non-exempt assets. They’ll then need to sell them for what they’re worth and give the proceeds to your creditors to cover some (or all) of the debt that you owe to them.

These assets are used as collateral.

What’s Included?

Included in this are any assets that are owned as of the date you filed for bankruptcy, as well as any assets that you may have received after the fact. While the first part of that sentence is simple enough, the second part can be a little bit confusing. Essentially, this refers to gifts, lottery winnings, inheritance, and any other kind of unexpected financial gain you may experience.

As a result, you need to tell your insolvency trustee about any sort of surprise profit that you receive (or expect to receive) while you are in the process of bankruptcy. These are technically called “after-acquired property”. This is different from say, a work bonus or retroactive government benefits, which will classify as earned income and will be subject to surplus income rule. Those earned incomes usually won’t be taken, at least not in full.

What other debts and/or assets are included in a bankruptcy filing? Find out here.

We will now take a more detailed look at each of the most common surprise profits a person might receive during their bankruptcy, and how you should progress if you feel you are going to receive one of them.


There are no official rules when it comes to reporting gifts you received during your bankruptcy. If we are getting technical, they can seize any valuable gift you are given. However, the chances of them coming and taking the few dollars you got from your mother-in-law are slim to none. Then again, if you were given a few thousand dollars as a gift, there is a very good chance that they will take it from you.

Wonder if you’ll lose your RRSPs during bankruptcy? Read this for the answer.

The same thing goes for any physical gifts that you are given (objects, etc.). If you are given something small or relatively necessary, it will often be covered by your exemption for necessary items. But if you are given something large and valuable that is more than your personal exemption, you might have to get rid of it and give it to your trustee so they can sell it for excess cash to pay your creditors.


If you get the news that you’ll be receiving an inheritance during a bankruptcy, you need to tell your trustee. They will then reach out to the executor and provide them with all of the needed paperwork. When you receive the money from the inheritance, the money will be given to the trustee, who will use it to pay back the creditors.

Click here to find out if you can file for bankruptcy online in Canada.

Of course, if there is enough to cover all of your debts, the leftover money will be sent back to you. If you expect to have an inheritance in the near future, it can be a good idea to let your trustee know this before you file, as well.

Lottery Winnings

If you win the lottery during the process of bankruptcy, your winnings are the property of the bankruptcy estate, even if you get the winnings after you are discharged. However, like with an inheritance, the entire amount you get isn’t at risk (unless you have a ton of debt). They will only take as much as they need to pay back your debts and any interest charges. Any excess money is yours to do with as you please.

Before you choose to file for bankruptcy, always consider these better options.  

Final Thoughts

In conclusion, while getting a huge unexpected payment during a bankruptcy is a rare occurrence, there is always a chance it will occur, so you should be aware of what to do during that case. As long as you are open and honest with your licensed insolvency trustee, they will be able to help you through the process and let you know what you need to do. If you’re considering filing for bankruptcy and are looking for assistance, we can help! 

Rating of 5/5 based on 4 votes.

In his over six-year career as a professional writer, Kale has focused on writing about finance, technology, cryptocurrency, entertainment, and sports. Kale's work has been published on Yahoo, RentHop, the Regina Leader-Post,, and Kale loves to create a wide variety of personal finance-related content. Including everything from how-to guides to featured articles, to advice pieces and everything in between. Whether he’s writing about the newest piece of technology or providing tips to help people with their finances, Kale is passionate about educating Canadian consumers and making sure they have the information they need to make the best decisions.

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