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Bankruptcy is a legal process that allows you partial or total relief from your debts. At the same time, your creditors will likely receive some repayment, depending on your family’s available assets. If you're beginning this process, learn more about how your children may be impacted below.

Will Filing for Bankruptcy Affect Your Children?

1. Bank Accounts

If you're listed as an account holder on your child's bank account, the money can be seized during bankruptcy proceedings. While these funds may be exempt in some circumstances, it pays to check with your attorney before filing.

Alternatively, if you've created a trust for your children, it's legally owned by them and thus will not be considered part of your estate. According to the Uniform Gifts to Minor Act, transfers into this type of account are considered irreversible, as long as you don't make them immediately before filing for bankruptcy.

2. Education Funds

bankruptcy

A college savings account belongs to you, and thus must be included in your assets for proceedings. However, in most cases, the beneficiary of this account is a child or grandchild, which protects it from outside interference.

To prevent fraudulent activity, there are limitations to this protection. If you transferred funds into the account within one or two years of filing for bankruptcy, each beneficiary is protected for around $6,200. If you made a transfer more than 720 days before filing, the funds will likely be off-limits for proceedings.

These rules vary from state to state, so consult an attorney about your local laws.

3. Property

Anything you've purchased is considered your property. As a result, unless you can prove that your child bought their belongings independently, their items will be considered your property and included in bankruptcy proceedings.

Your property will be affected differently depending on which chapter of bankruptcy you file for. Under Chapter 13, your property is unaffected, but under Chapter 7, property not covered by exemption might be seized and liquidated.

Generally, a child's property is exempted from bankruptcy proceedings. However, if your child owns any extremely valuable possessions, be sure to bring this up with your attorney.

 

Protect your family in the face of bankruptcy with the experienced attorneys at Upstate Legal Center of John V. Shepard in Rochester, NY. John Shepard has over 30 years of experience dealing with bankruptcy, divorce, estates, and more. Whether you’re thinking about filing or ready to proceed, he’ll present all your options, ensure you file the correct paperwork, and work to get the best possible outcome. For attentive service focused on results, call (585) 429-5422. You can also read more about his bankruptcy services online.

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