When you are facing a substantial amount of personal debt that you cannot realistically repay on your own, you might consider filing for bankruptcy. In most cases, this is not an easy decision. Your bankruptcy will change your life, and if you have dependents, it will impact their lives, as well.
It is important to separate myths from facts about how bankruptcy can affect a filer’s family. It is also important that you enter the bankruptcy process with an understanding of how it can impact your family so you can work to mitigate the side effects of the bankruptcy.
Some of Your Child’s Property Could be Liquidated
In a Chapter 7 bankruptcy, all nonexempt assets are liquidated to repay your debt. This can include toys, furniture, and other nonessential items you purchased for your child.
Your Child Might Need to Switch Schools
If your child attends private school, he or she may need to switch to public school if you file for Chapter 13 bankruptcy. In the means test, you can deduce up to $1,875 per child, per year as an educational expense. If your child’s tuition exceeds this, he or she might need a scholarship or a new school.
Know Which Assets are Part of the Bankruptcy Estate
Money held in a trust for your child’s future is not part of your bankruptcy estate, which means it is safe from liquidation. If your child has his or her own bank account, this money is also not considered to be your money, even if you are a custodian on the account.
Do not transfer money into your child’s account in an effort to keep it from your creditors. This may be deemed to be a fraudulent transfer and if so, you will have to return the money to its original account.
Your Bankruptcy will Not Impact Your Spouse’s Credit
When you file for bankruptcy, your credit score suffers an impact. If you file as an individual, rather than with your spouse, your spouse’s credit will not be affected.
There are other ways your spouse will feel the impact of the bankruptcy, though. If you file for Chapter 7, nonexempt assets in your household may be liquidated. If you have to stick to a budget under a Chapter 13 plan, his or her cooperation is key to successfully repaying your debt.
Work with an Experienced Buffalo Grove Bankruptcy Lawyer
When you file for bankruptcy, you are not only changing your financial reality, you are changing the financial reality for all your dependents. In many cases, choosing to file for bankruptcy has a positive effect on a filer’s entire family because it enables him or her to eliminate the debt holding the family back from financial prosperity. To learn more about bankruptcy process and how it can be a positive step for your family, contact our team of bankruptcy lawyers at Newland & Newland, LLP today to set up your initial consultation in our office. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Kevin Gent)