Filing for bankruptcy can be scary when you have a family to support. While on one hand you do need to resolve your debts and get back on track, you also want to be sure that your children have everything they need. Particularly with Chapter 7 bankruptcy, a liquidation bankruptcy, you worry that they may lose clothing, furniture or other necessary items needed to live comfortably.
You can put your mind at ease because the point of a Chapter 7 bankruptcy isn’t to sell everything you have or to do anything that would harm your children. Realistically, the positive impact of your bankruptcy may help you resolve debts that would be more harmful to your children if left alone.
Will I have to liquidate my child’s belongings?
Part of Chapter 7 bankruptcy is liquidating certain assets from your home. A bankruptcy trustee has the legal authority to take away your child’s toys, like a teddy bear or doll, but it’s unlikely that they will. Many of these kinds of items have no real resale value of note, so it would be more harmful to sell the items off than to leave them in the home.
That being said, if your child has a PlayStation 5 or you have a baseball signed by Babe Ruth, then those items may be sold because they have a very real, high value to others.
What happens to my child’s bank account?
If you set up a bank account for your child, you will likely only have to worry about the trustee looking into it if you recently made large deposits. Otherwise, the account may be able to stay as it is. The court will still want to see statements, of course, to be sure you haven’t moved large amounts of money over recently.
These are a few questions that parents have as they go into bankruptcy. Your children don’t technically have assets of their own that are separate from yours, but most courts are reasonable with how they approach children’s assets and will focus on doing what’s best for your kids in this situation.