When you decide to file for bankruptcy, you likely have more things on your mind than your financial future alone. You’re considering the future of your family and of course, your children. How will filing for bankruptcy affect them? Are there any adverse effects I should be aware of?
We’ll answer these pertinent questions and more in our blog post below.
Your Children’s Personal Property
Property is a big concern for parents. You may be wondering, “Will my children’s property be included in my bankruptcy estate? What about items I’ve purchased for them such as toys and clothing?”
Be aware that any items you’ve purchased for your child are actually considered your property in this matter. This definition of property extends to clothing, toys, beds, furniture and books. There is an important distinction when it comes to this property. You may have a child of employment age who receives an income. If he or she has purchased items with this income and has the receipts to prove it, you may be able to exclude these items from the estate.
However, keep in mind that sentimental items and other personal treasures are generally unlikely to have the value needed to be liquidated, and can usually be exempted.
We mentioned bank accounts earlier. If your child has bank or college savings accounts in his or her name, those should be exempt. These accounts would only be accessible for liquidation if you moved money to the account to hide assets.
You’ll want to keep an eye on any money that was deposited into these accounts a year before filing bankruptcy. They may be accessible for liquidation.
Child Support Payments
Though your child support payments may be high, they are not eligible for discharge in bankruptcy. In fact, these debts are generally among the first paid in Chapter 7 bankruptcy cases. In Chapter 13 bankruptcy, child support payments come before debts to other creditors.
It is vital to keep up with child support payments after filing bankruptcy. Otherwise, the court will not be able to finalize your repayment plan or allow for a discharge.
Loans and Tuition
As for loans, your bankruptcy filing will not affect your child’s ability to take out student loans to pay for college. They may be eligible for Pell Grants and Stafford Loans if they qualify, and your bankruptcy has no bearing on this decision.
However, if you have declared bankruptcy within the past five years, you will be ineligible to pay for PLUS loans and Graduate PLUS loans in most cases. Your child may need to take out loans on their own or stick to unsubsidized Stafford loans.
At Tyler, Bartl & Ramsdell, P.L.C. we understand the concerns filing for bankruptcy can bring. Don’t leave the future of you and your family up to chance. Meet with our experienced bankruptcy attorneys for a free consultation and prepare to take steps to a secure future.