Can Bankruptcy Affect My Children?
If you are currently struggling financially, filing for bankruptcy can grant you the opportunity to reorganize your debts or have your debts forgiven. However, as much as bankruptcy can highly benefit you, you need to be aware of some of the repercussions of bankruptcy. You must consider these repercussions before you set out to file for bankruptcy. One of the things debtors should consider before filing for bankruptcy is how such a move can affect children. Nevertheless, keep in mind that the positive impact of bankruptcy on families often outweighs any inconveniences.
It is natural for some parents to have some concerns about how bankruptcy will affect their children. This is because children are very important to parents, and parents’ primary goal in life is to do things that better their children’s lives. Some of the most common concerns that arise when parents start considering bankruptcy include concerns about how bankruptcy will affect;
- children’s property and
- children’s savings
Will My Children Lose Property if I File for Bankruptcy?
Usually, Chapter 13 bankruptcy allows debtors to keep their property. On the other hand, Chapter 7 bankruptcy allows debtors to keep only exempt property. In a Chapter 7 bankruptcy case, the bankruptcy trustee sells a debtor’s non-exempt property to repay creditors, and then the remaining debt is what is forgiven.
So, is your child’s property really theirs or yours? Any property you purchased for your child is considered yours in bankruptcy. On the other hand, any property your child purchased with their money is considered theirs.
Your children can lose non-exempt assets that are considered yours. Fortunately, bankruptcy trustees rarely take an interest in such property because children’s items usually have little or no value. Also, bankruptcy trustees don’t want to leave children without furniture or toys. Nonetheless, if your child owns a valuable item, which you got for them, you might want to consult your attorney and learn if the item is exempted from your bankruptcy.
Children’s Savings and Bankruptcy
This is usually a complex area, which you must discuss with your attorney before you begin the filing process. Unfortunately, bankruptcy can negatively affect children’s savings accounts. Your child’s savings account can be seized in a bankruptcy filing.
Fortunately, you might be able to protect your child’s savings if, for example, you open an account for them under the Uniform Gifts Minors Act. You can also open an account under the Uniform Transfers to Minors Act to protect your child’s savings. Money kept in such accounts rightfully belongs to children. Also, parents cannot withdraw money from such accounts for personal use or for the purposes of repaying creditors. For these reasons, bankruptcy courts take no interest in such accounts.
Nonetheless, be careful about transferring money into a child’s account right before filing for bankruptcy.
Contact a Southeast Iowa Bankruptcy Lawyer Today
At the Noyes Law Office, we understand how much you value your children. We are here to guide you on how you can make the bankruptcy process stress-free for your children. Our Southeast Iowa bankruptcy attorneys are also available to advise you on other options you can consider. Contact our office right away to receive advice.