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Although filing bankruptcy is sometimes an unfortunate necessity, you can prepare for its consequences by knowing what to expect. For example, bankruptcy can have some influence on your children’s lives. Being aware of this impact, however, can help you manage the effects of bankruptcy in a way that provides a stable path for your children’s lives. 

How Will Filing Bankruptcy Affect Your Children? 

1. Property Seizure 

Your child can keep any personal property that you can prove they bought themselves. However, anything that you’ve given them is still considered legally yours. Upon filing bankruptcy, much of what both you and your child regard as theirs may be seized by the bankruptcy trustee, except for a predetermined amount of clothes and furniture.

2. Education Options 

filing bankruptcyChapter 7 bankruptcy doesn’t prevent you from paying tuition for your child’s private school. Chapter 13 bankruptcy, however, only permits spending $1,875 per child each year for educational expenses. The court may decide to lift that cap based on the specifics of your situation.

If you’ve started depositing money in an education savings account according to the stipulations of section 529 of the Internal Revenue Code, your child may retain that. They’ll also remain eligible for Stafford loans and Pell grants, as you will be unable to use a Parental Loan for Undergraduate Students.

3. Asset Seizure 

If you’ve set up a bank account for your child in accordance with the Uniform Transfers to Minors Act or the Uniform Gifts to Minors Act, the money in that account belongs to your child and cannot be taken away. However, if you file bankruptcy shortly after transferring money to that account, your creditors could view it as a questionable attempt to keep that money indirectly.

4. Child Support Payment 

Late child support payments are among the first debts to be paid off in both Chapter 7 and Chapter 13 bankruptcies. Filing Chapter 13 may allow you to come up with a payment plan if you can’t pay it all off at once. Since filing bankruptcy frees you from other debts, it could make it easier to catch up.

 

For help ensuring your child’s security as you navigate the complicated process of filing bankruptcy, contact attorney Brian Kawamoto in Pearl City, HI. With more than 25 years of experience as a bankruptcy lawyer and IRS tax attorney, he can also assist with other legal and financial problems, including IRS tax audits, tax relief, estate planning, and drawing up wills. He’ll guide you through your situation with dignity and integrity. Schedule an appointment today by calling (808) 486-6107 or sending a message online

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