In filing bankruptcy, a debtor is required by law to report all of his or her assets to the court. This is so the court can seize and liquidate assets, as needed, to pay back some of the debt owed. Things start to get a little hairy when the debtor filing bankruptcy has children who also have assets. The question is, are the children's assets at risk too?
What Happens To Your Child's Bank Accounts?
The biggest concern a parent filing for bankruptcy has is what happens to the saving account that the parents left their child. Will the court seize the bank account or does the child get to keep it?
Thanks to the Uniform Transfers to Minors Act and Uniform Gifts to Minors Act, your child's bank accounts will be safe when you file bankruptcy. These two acts clearly outline the fact that the savings account or trust account of your child is not your money. Since it is not your money, you cannot access it. For this reason, it cannot be used to pay off your debts.
What Happens to Your Child's Property?
The unfortunate truth is that even though your child's furniture, clothing, video games, and electronics all belong to your child because you gave him or her these items, the court still views these items as yours. This means that if any of the items you have given to your child contain monetary value, they could be seized and liquidated to pay off your debt.
The one and only exception is if your child purchased an item with his or her money. It, however, is not just enough for you to say the child purchased the item with his or her own money. You must be able to prove this to be true.
Can You Transfer Your Child's Assets to Protect Them?
The biggest reason many parents get in trouble when they file bankruptcy is because they transfer their children's assets to someone else prior to filing bankruptcy. This is known as a fraudulent transfer, and it can get you in a lot of trouble. As tempting as it may be, do not attempt to protect your child's assets by transferring them. Talk to a lawyer and see what other options you have to protect them.
The most important thing to keep in mind is that all bankruptcy cases are different. The best thing to do in this situation is to speak with a bankruptcy lawyer like Arthur M Richard about your options.