If you are the parent of minor children, you may be worried about how declaring bankruptcy may affect their lives. The good news is that for most filers, a bankruptcy does not negatively affect their children. An experienced bankruptcy attorney can help you understand how a bankruptcy might affect your family and help you plan accordingly.
Personal Property
For the purposes of bankruptcy, property that you have purchased for your minor children is considered to be your property. This means that your child’s books, games, toys, and clothes are all considered to be part of the bankruptcy estate. This is, of course, unless your child is employed or has an independent source of income. In that case, the property he has purchased with his own funds are his alone. Personal property becomes a concern if you are contemplating filing a Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, you are allowed to keep exempt property, but other property in excess of that exemption is sold to pay creditors. For most filers the value of the property they have given their children is either exempted or of such low value that it is not worth the trustee’s time to seize and sell it.
Child Support
Child support obligations are not dischargeable in bankruptcy. This means that if you currently owe child support, you will continue to owe child support even after the bankruptcy. Nevertheless, a bankruptcy could give you the opportunity to get caught up on payments. For example, in a Chapter 13 bankruptcy, child support payments become part of the repayment plan.
529 Plans
If you have been using a 529 plan to save for your children to go to college, these accounts are typically exempt from bankruptcy. However, a court will look to whether the named beneficiary is a child and when the deposits to the account were made. You could not, for example, start a 529 account in your own name to preserve money during bankruptcy. When a parent experiences bankruptcy, there are times when their children and their children’s property can be affected. An experienced bankruptcy attorney can help you navigate the bankruptcy system and help mitigate any negative effects on your family.
If you are considering filing for bankruptcy, let us help you explore all of your options. We are bankruptcy lawyers who know how to give you a fresh financial start. Contact our New Jersey law firm online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation with an attorney at Levitt & Slafkes, P.C..