Filing bankruptcy is certainly not a nice experience. People are indeed in a stressful, emotional and tight situation while in bankruptcy. Bankruptcy affects not only you but also your family especially your children. It is important that you understand the potential consequences bankruptcy can have on your children, if you have children or dependents and are considering bankruptcy.
If a debtor contributes money towards a child’s college fund or to college tuition, filing for bankruptcy could potentially prevent these contributions from occurring. The creditors and court will attempt to limit the amount of your expenses and may prioritize their collection accounts above your child’s education, when you file for bankruptcy. While bankruptcy courts will allow necessary expenses such as housing, food, utilities, your child’s education may not be viewed as essential. Consult with a bankruptcy lawyer to understand more about how your child’s education may be affected when filing for bankruptcy if you find yourself in this situation.
When you file for bankruptcy, the line can get blurred between your assets and your child’s assets. For example, you opened a bank account for your child but failed to take the adequate steps to set it up correctly to be protected from something like a bankruptcy. You may run the risk of the money in that account being considered your money and not your child’s when it comes time to file bankruptcy. This type of problem can occur if you have ever used it to pay your own bills or if the account is under just your name and not your child’s. Your children’s assets can be better protected from bankruptcy if the accounts are opened under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). Consult a bankruptcy lawyer to help find the best means of fixing this problem if your child’s assets are at risk of being affected by bankruptcy.
It is damaging to children in a family bankruptcy to defeatist behaviour and model negativity. Children are intelligent, and while they are immature they can be extremely sensitive to the reality of issues which their family is facing. If they see their father depressed or mother crying they too get depressed. They might discover a foreclosure notice taped on the front door or answer the phone and listen to harassing creditors and rude debt collectors.
Children are protected from bankruptcy whether or not an in debt parent is behind on child support payments. Child support obligations are a top priority and are ineligible for bankruptcy debt discharge. If you file for bankruptcy, child support payments become a top priority when assets are being liquidated and the child support payments will be arranged in the repayment plan.
You should be aware about the effect of bankruptcy on your child’s future and the complications that may arise because of this. Therefore, you should discuss with a bankruptcy attorney about the issue before taking a decision in order to protect your child from being affected.