Depending on your situation, your children may or be affected by a bankruptcy filing. If you file for bankruptcy under Chapter 13 reorganization, any property you or your children have is unlikely to be seized. However, filing for Chapter 7 bankruptcy—in which you use your existing assets as collateral to pay debts—is a bit more complicated.
Typically, you have to list all assets you own in your bankruptcy paperwork. If you paid for your children's toys, clothing and furnishings, it is considered your property, though Arizona law may allow for exemptions for property such as furniture or articles of clothing up to a certain value. For more information on exemptions and what they can mean for you, you should talk to a Phoenix bankruptcy lawyer today.
What about my child's trust fund?
Money sitting in a trust or bank account for your child established through the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act is generally not classified as part of a bankruptcy estate. However, if you make transfers to such an account while you are in significant debt, it may become part of the estate. Deposits made at least a year ago into an education fund may also be protected. Additionally, any money your child earns on their own will not be part of a bankruptcy estate, as it is not your money.
The types of property that may be exempt from bankruptcy are:
- Trusts and bank accounts of minors
- Deposits in educational funds predating the past 365 days
- Money your child earns through a job
- Anything your child bought using money they earned on their own
If you are in debt, you have options to manage your financial situation. At Leonard V. Sominsky, ESQ., PC, our Phoenix team has more than 14 years of experience with consumer bankruptcy in Arizona, and we have assisted more than 1,000 people on the path to a brighter financial future. For a risk-free, no-cost consultation, please call us today or fill out our website's case evaluation form.