Will your Greensboro bankruptcy affect your kids?
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When you’re considering bankruptcy, one of the things you may wonder is how it might affect your spouse, children, friends, and family. Greensboro bankruptcy isn’t something that you likely want people to know about, and although it is a matter of public record, people usually won’t know unless you tell them.
You may worry about sharing this information with your children which is up to you, but most parents don’t usually discuss finances with their kids to this extent. Second, you may worry how it could affect your children if they have assets or you have assets that benefit them. Here’s what you need to know about the potential effects of Greensboro bankruptcy on your kids.
Does Your Child “Own” Property?
Children can’t own property until they are 18. Anything that is theirs, for the most part, is considered yours in the eyes of the bankruptcy court, aside from items held in trust or certain qualified savings programs. For example, if you have given your child a car, that is considered your asset and part of your Greensboro bankruptcy estate.
The same goes for laptops, furniture, and other items they possess. Fortunately, North Carolina has reasonable exemptions to protect property during bankruptcy. The items you gave your child will probably be exempt unless they are high value and you don’t have enough exemptions to protect them.
Does Your Child Have a Bank Account?
Generally, any money you hold in trust for your child’s education is exempt from the long reach of the bankruptcy trustee. If you save funds for your child under the Money in Uniform Gifts to Minors Act or Uniform Transfers to Minors Account, the bankruptcy trustee can’t touch it.
However, if you transfer funds to these accounts right before you file for Greensboro bankruptcy, it could raise suspicion that you’re trying to conceal assets from the court. If this happens, the trustee may file a motion to recover the funds from your child’s account.
What About Child Support Payments?
If you pay child support, you will not be able to discharge or lessen it through the Greensboro bankruptcy process. Regardless of the type of bankruptcy you file (Chapter 13 or Chapter 7), you will still have to pay your child support payments.
Alimony and child support are considered a priority debt that ranks before other things you may owe. As for child support paid to you, so long as you can prove that all of the money is necessary for the support of your child it can be protected.
Can 529 Educational Funds Be Taken in Bankruptcy?
Parents might also be worried about what bankruptcy will do to the educational savings they set up for their children. Fortunately, these educational savings, set up by Section 529 of the Internal Revenue Code, are safe from the reach of the bankruptcy trustee. Protection of these funds in bankruptcy applies to your children, grandchildren, step-children or step-grandchildren. The funds must be deposited into the account at least 365 days before you file Greensboro bankruptcy.
Are Student Loans Affected?
If you have a child in college, you filing bankruptcy does not affect their eligibility for student loans, but it will affect you being able to access PLUS loans. Once you file bankruptcy, you’re ineligible to borrow under the PLUS program for five years from the date of discharge. If you’re unable to borrow under PLUS, your student can borrow more under the Stafford loan program.
Overall, your bankruptcy filing should not adversely affect your kids. In fact, using bankruptcy to clear up a financial mess can make things better for your children and your entire family. To find out more about the benefits of bankruptcy, contact the Law Offices of John T. Orcutt. Read reviews from satisfied clients then call +1-919-646-2654 for a free Greensboro bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.