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Learning How Children’s Accounts Are Affected When Parents File Bankruptcy

When parents of minor children decide to file bankruptcy in Valdosta under Chapter 7 protection, they may wonder how this will affect the youngsters. They may worry about other people finding out and viewing the family negatively. They’re afraid they may be required to sell some of the children’s belongings. They don’t know how bankruptcy will affect savings accounts they have set up for the kids.

A Child’s Belongings and Bank Accounts

Typically bankruptcy trustees are uninterested in acquiring money from selling children’s possessions unless there is something very valuable. A child’s savings account in a bank or credit union usually is exempt from the dissolution requirement applied to the general savings accounts of adults who file bankruptcy in Valdosta. The same is true for 529 educational funds. These financial instruments are intended to encourage parents to save for a child’s future education by offering tax advantages.

An Important Point

One important point, however, is when money was last deposited. Bankruptcy trustees must look for evidence of fraud. Examples include a person funneling money into accounts that are exempt or running up credit card balances within a few months to a year before filing. In those cases, the recent deposits may not be exempt, and the recent credit card charges might not be discharged.

An exception may be made if there are records showing that any recent deposits to a child’s savings account were not from the parents. Money might have been a gift from grandparents or godparents, for example. A younger teenager might have been earning money by mowing lawns, delivering newspapers or babysitting.

For more information visit Charles Farrell Jr. LLC.