If you have a family, you won’t be the only person affected by filing for bankruptcy. How will this big life decision affect your children? Before you take any action, be sure to understand the different types of bankruptcy and their consequences on your family life.
The Effects of Bankruptcy on Your Children
1. Property: The property in your child’s room is considered your property. Their toys, beds, clothing are all part of your property. If the child has a large item that they paid for themselves and can prove it, it can be considered the child's property. When you file for Chapter 13 Bankruptcy, you are allowed to keep your property. Chapter 7 Bankruptcy, only some of your property is considered exempt, varying from state to state. Often, a bankruptcy trustee will not go after your child’s property, as they will only be interested in items of high-value.
2. Bank accounts: The money that is legally set up in a child’s bank account belongs to the child. If you have an ongoing savings plan set up for the child, then the money inside that account remains untouched. But if there is evidence of large amounts of money being moved into their accounts right before bankruptcy, then a trustee can look into that. Most of the time, they gain access to that money.
3. Education: Chapter 13 allows an allotted amount per year that can be spent on educational expenses. If your children are in college, they will have access to pell grants and Stafford loans as usual.
There are many factors to consider before filing for bankruptcy. And one of the biggest things you should take into account is how that decision is going to affect your family.
If you have any bankruptcy questions, schedule an appointment with Miles & Hatcher, LLP. We can answer all of your questions and worries about the process and help you decide if it is the right action to take. If you would like to schedule a free consultation, give us a call at (909) 481-4080.