Many people have debt that can take a toll on their family’s quality of life. Fortunately, filing for personal bankruptcy offers a way to get financial troubles under control. Before deciding if this is the best solution, there are several factors to weigh, including how it could potentially impact your children. While this will depend on your case's specific circumstances, here are a few guidelines to consider.

How Your Kids Could Be Affected by Bankruptcy

1. Personal Property

During Chapter 7 bankruptcy, any non-exempt property you own can be seized to pay back your creditors. Items you've purchased for your children, such as clothing, furniture, and toys, are considered your property under bankruptcy law, though they’re rarely valuable enough to be liquidated. Still, the only way to exclude these items is by proving your child bought them with their own money. Additionally, if you file for Chapter 13 personal bankruptcy, you aren't required to give up assets.

2. Educational Funds

While Chapter 7 bankruptcy won't usually prevent you from paying private school tuition, this may not be allowed during Chapter 13 bankruptcy, as it only permits a specified amount to be spent on education.

Also, although funds in a 529 plan are protected as long as your child is the beneficiary, deposits made up to one year before filing can be taken. Furthermore, you won't be eligible to take out financial aid to help pay for your child's college education if you declared personal bankruptcy in the past five years. However, it won't disqualify them from receiving grants and loans.

3. Bank Accounts

In most cases, any money held in a bank account under your child's name will go untouched during a bankruptcy. The only time these accounts are liquidated is if the deposit history shows transfers that appear to be an attempt to hide assets. A bankruptcy attorney will know the specific exemption laws in your state and how to disclose these finances so they're protected.

If you’re interested in learning more about personal bankruptcy, reach out to Brian R. Cahn & Associates, LLC in Cartersville, GA. They’ll carefully assess your financial situation and explain all your rights and options, so you can make an informed decision. Backed by more than 25 years of experience, this firm has successfully guided countless residents across Whitfield, Murray, Gordon, Bartow, and Paulding counties through the bankruptcy process. Call (770) 382-8900 to schedule a consultation, or visit them online to learn more about how they can help you regain control of your finances.