If you have decided to file for bankruptcy, you likely have a number of important questions. You may be wondering what assets you will be able to keep after the bankruptcy has concluded as well as what your future life will be like. It is also common to wonder exactly what the bankruptcy process involves.
If you are a parent, you might also be worried about how bankruptcy will impact any money that you have saved for your children as well as how your bankruptcy will affect your children’s future.
The purpose of this article is to answer some of these questions, and hopefully to resolve any uncertainties about what lies ahead for your loved ones.
Do Not Worry About Your Children’s Bank Accounts
There is little to worry about when it comes to assets placed in a child’s bank account being lost in the bankruptcy process. If a parent holds money in a trust for children, those assets are not categorized as part of the bankruptcy estate. Instead, these assets are viewed by bankruptcy courts as property belonging to the child. Consequently, these assets will not be used to pay creditors during bankruptcy proceedings.
College Savings are Sometimes Protected
Many parents have discovered that creating 529 plans for children is an excellent way to put aside assets for the child’s college costs because these plans minimize taxes that are placed on assets. Another advantage of 529 plans is that they are excluded from bankruptcy proceedings, which means that assets placed in 529 plans cannot later be used to pay off creditors.
This is only true, however, if the assets were placed in a 529 plan for the benefit of the child and the assets were not placed in the plan during bankruptcy proceedings or within two years before filing. If assets were placed in a 529 plan prior to two years before filing for bankruptcy, these assets will be fully protected from seizure during the bankruptcy process.
There are Ways to Retain Personal Property
Most physical items that are found in a house are viewed by bankruptcy courts as belonging to the parent, even though the children might believe that the property is theirs. This means that things like books, clothing, furniture, and toys that children use can often only be kept in one of two situations. First, the parent might be able to establish that property was purchased with the child’s money and is as a result excluded from the bankruptcy process. Second, the property can be retained if it falls into one of the bankruptcy exemption categories.
While there are limits in Florida to the amount of personal property that a person can keep during Chapter 7 bankruptcy, most bankruptcy trustees see little profit from selling things like clothing and furniture unless the items are particularly expensive.
Contact an Experienced Bankruptcy Lawyer
Handled improperly, the bankruptcy process can negatively affect a number of important areas in your life. This is why it is a wise idea to retain the assistance of an experienced bankruptcy. Contact the Adam Law Group today to speak with a knowledgeable bankruptcy attorney who has helped many others successfully navigate this process.