If you are facing insurmountable debts, bankruptcy can offer much-needed relief from aggressive creditors. The decision to file should not be taken lightly, however, as it does come with consequences. For instance, the filing will show up on your credit report for anywhere from seven to ten years. Bankruptcy can also impact your family, including your kids. Learn how so you can better make an educated decision on this significant life matter.
The most common types of bankruptcy are Chapter 13 and Chapter 7. If you file for Chapter 7 bankruptcy, a trustee is appointed to take over your assets and liquidate them to pay off creditors. This may include your family home and possessions — even your child’s bedroom furniture and toys. If you can prove that the child bought the items with their own money — for instance, if your teenager worked an after-school job and bought their own car in their name — they will be exempt.
Your children’s bank accounts held in their own name should not be affected by your personal bankruptcy proceedings. However, the courts will be looking for any signs of bankruptcy fraud, such as hiding your money by transferring it to other accounts. This means that any deposits you made into your kids’ bank accounts in the last year may come under scrutiny.
Fortunately, your bankruptcy filing does not prevent your child from taking out student loans to pay for further education. Note, however, that you will likely not be able to co-sign loans for your child, as bankruptcy will take a toll on your credit score. If your kids are still young enough that your debts will be discharged, and your credit report will be refreshed before they have to pay for college, this can be a non-issue — but it requires careful planning.
Want to know more about bankruptcy and how it will affect your family? The Gil Law Firm can help. Located in Dothan, they serve Alabama, Georgia, and Florida. With over 15 years of experience, Rafael Gil III and his team will provide you with the knowledgeable legal insights you need. Get an overview of their practice areas online. To request an appointment, call (334) 673-0100.