If you’re thinking about declaring bankruptcy, it’s natural to wonder how the proceedings might affect everyone else in the household, including your children. Although every family’s situation is different, there are a few generalities that apply in most scenarios. Here’s what you should know about how discharging debt throughout bankruptcy could affect your kids.

How Declaring Bankruptcy Could Affect Your Children 

1. Providing a More Relaxed Home Environment 

Facing an overwhelming amount of debt is undoubtedly stressful. Children are incredibly intuitive, and they usually know when something is wrong, even if their parents don't discuss it with them outright. Fortunately, eliminating certain debts will relieve a considerable amount of tension in the household, making it a far better environment for everyone. 

2. Reducing Their Total Savings 

If your children have bank accounts in their own names, the funds should be exempt from liquidation. Any savings in a 529 educational fund are also exempt. However, there is one major caveat to this; anything you have deposited into such accounts within the past year may not be protected during the bankruptcy proceedings. The court is going to review all recent deposits to ensure you are not attempting to hide assets in your children’s accounts. 

3. Increasing Their Student Loan Obligations 

Depending on how old your children are, they may have to take out additional student loans in their own name if you declare bankruptcy. Typically, parents who have discharged debt within the past five years are ineligible for PLUS loans, which means more of the burden of covering tuition may fall on their children.  

If you want to learn more about the potential ramifications of declaring bankruptcy, turn to O’Connor, Mikita & Davidson. With more than two decades of experience and three offices throughout Cincinnati, OH, they provide comprehensive legal counsel for clients throughout all of Hamilton County. As a full-service firm, their areas of practice include criminal, civil, family, bankruptcy, personal injury, and estate planning law. To find the office nearest you, visit their website, or call (513) 793-5297 to schedule a free consultation.