A bankruptcy can be scary, especially if you’re worried about other people in your family and their possessions. Many people with children worry that a bankruptcy will affect their kids and result in their losing the assets that belong to them. You might be concerned that they’ll lose property, clothing or the option to obtain loans for school.
To start with, consider what is or is not considered to be your property. Any property in your home is considered to be yours, even if it technically belongs to your child. That includes items such as bedroom furniture or toys. However, if someone else gave your child a gift or you can prove that your child bought something on their own, then the item will not be your property and can be protected in bankruptcy.
Other items that belong to your child are things like money held in a trust for your child, your child’s inheritance from another family member or educational savings held in a 529 account. Keep in mind that transferring money into any child’s bank account can come under scrutiny if you do so when you’re insolvent.
Which assets can be taken in bankruptcy?
Once you decide on the type of bankruptcy you want to pursue, you’ll have a better idea about what you’ll potentially lose. In a Chapter 13 bankruptcy, you will likely not have to give up any of your assets. Comparatively, a Chapter 7 bankruptcy is a liquidation bankruptcy and may result in the loss of some nonexempt assets.
You will be allowed to keep items that are essential. That includes items like your children’s clothing or necessary items like school bags or some toys. Non-luxury items are usually exempted.
Bankruptcy doesn’t have to scare you
At the end of the day, a bankruptcy isn’t all bad and does have its benefits. While you may be concerned about losing assets that belong to yourself or others in your family, you should know that there are strong exemption options that your attorney can help you with. In some cases, you may not have to give up anything at all.