While the decision to file bankruptcy may be complicated, it certainly is always difficult. It may be an even more difficult decision when anyone considering bankruptcy has children. Many people are concerned, and rightfully so, not only about how bankruptcy will affect their children presently, but how bankruptcy will affect them in the near and distant future. The compassionate attorneys at the Morrison Law Group are experienced in helping Utahns who are both parents and bankruptcy debtors find relief and a fresh start.
If a bankruptcy debtor has children who have bank accounts, then any money in a child’s bank account is their property provided that it is held in trust on their behalf. Thus, creditors and the bankruptcy trustee may not legally access this money. Of course, transferring money to a child’s trust account before filing bankruptcy may be seen as bankruptcy fraud. The consequence may be that the trustee seizes these funds for liquidation with the proceeds paid to creditors.
A debtor’s household goods usually include the property that his or her children possess as the result of a gift. This property may include toys, computers, bedroom furniture, and clothing. Bankruptcy exemptions allow debtors to keep this type of property – with limits. Also, the disposition of this property may depend under which chapter of the Bankruptcy Code that a person is filing a bankruptcy case, Chapter 7 or Chapter 13. Even if the property of a child does not fit within an exemption, unless it is of significant value, there is a high likelihood that it will remain unaffected by the bankruptcy filing.
Bankruptcy law treats child support obligations as priority debts, which are nondischargeable in bankruptcy. A Chapter 13 bankruptcy may allow a debtor to pay child support arrearages in a Chapter 13 plan of reorganization. In other cases, it may be difficult to obtain a discharge for debtors who are not current on their child support obligations, whether they file a Chapter 13 or Chapter 7 bankruptcy case.
Children will still qualify for need-based college education loans but the parent-debtor will not be able to qualify for financial aid based on the bankruptcy and its effect on a credit score. However, in this situation, a debtor’s child may still qualify for higher Stafford loan limits if credit-based loans are unavailable.
Bankruptcy trustees generally will not attempt to take a child’s present income. Also, many states have exemptions designed to protect the earnings of a minor. it is always wise to seek the help of an experienced bankruptcy attorney.in this situation, and any situation involving children who may be affected financially by a bankruptcy filing.
Theron Morrison and the Morrison Law Group help their clients through every important stage of their bankruptcy case, especially when children are involved. Call 801.456.9933 today to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.