When you file for bankruptcy, obviously, you will be concerned about any assets your children have. As a result, you may be left wondering what is going to happen and how it will affect the kids. You will need to speak with your attorney to clarify the details of this issue, because what happens will depend greatly on your children’s age and what assets they have. To help you get a better idea of what to expect, let’s consider different types of situations and scenarios that could arise depending on you, your children, and the assets.
The Age Variable
If your child is a minor and you have purchased property for them, such as toys, furniture, video games, etc., then those items are technically your assets, not your child’s and they would be considered in the bankruptcy. However, let’s say your child is 16 years old and has a part time job. They used money they saved at that job to buy a used car. This vehicle is their property, not yours. It cannot be seized by the bankruptcy courts in that situation.
Before you begin worrying about your child’s toys, clothes, and furniture, keep in mind that a certain amount of these types of items can be exempt. Even if you don’t have room to exempt all of their things, you likely will not have to worry. The courts usually do not go after used toys and furniture unless one of the items happens to be extremely valuable.
Bank Accounts and Trust funds
There are two acts that can help protect money in a bank account for your child, including the Uniform Gifts to Minors Act and the Uniform Transfers to Minors Act. If your child has a bank account or trust fund that was set up under these acts, then it cannot be touched by your bankruptcy. It will be protected because it legally belongs to your child, no matter their age.
529 Educational Funds
If you have a 529 educational funding plan set up for your child, then this will be protected from the bankruptcy for the most part. There are some limits and concerns that you need to understand, however. The beneficiary of the fund must be a child, grandchild, stepchild, or step grandchild. Additionally, deposits made into the fund within a year of bankruptcy filing will not be protected.
With this information in mind, you may be tempted to transfer as much money as possible into your child’s account before you file for bankruptcy. This is fraud and can lead to legal consequences. In fact, even if you innocently transferred funds into your child’s account within several months of your bankruptcy, there will be an investigation. That’s because the court needs to ensure you are not trying to hide assets from the bankruptcy.
There are actually legal ways that you can protect your assets to some extent. Your bankruptcy attorney will help you explore these options. Don’t take chances with the law in any attempt to protect your money, and instead pursue the legal avenues so that you do not deal with even more problems in the future.
There are a number of variables that will determine what assets of your child’s will be protected and what will not when you file for bankruptcy. This is one of the many reasons why it is so very important to hire an experienced bankruptcy attorney. They will help you navigate the whole process and determine what you need to do and what methods you could pursue to ensure your children are best looked after when you face such financial troubles.