Each debtor seeking bankruptcy protection must make full financial disclosure to the court. This means that he/she must disclose all of his/her assets, including those that are really owned by his/her children. What happens to those assets will depend on your individual circumstances, so it is important that you discuss these assets with us before your filing.
For example, since minor children cannot open bank accounts in their name, it is common for parents to open custodial bank accounts (UTMA accounts) for their children. As long as the only money that is deposited into such an account is the child’s money, and as long as the parent doesn’t use the money for his/her own purposes, the money will not be a part of the parent’s bankruptcy estate (it will be protected).
One factor that can impact how an asset is handled in a bankruptcy is whether a child purchased the personal property with his or her own money. For example, if a debtor has a teenager who has a job and purchased a car to drive to school and work, we can likely prove to the court that the car is not the parent’s asset, and should be excluded from the parent’s bankruptcy estate.
An area where parents can get into trouble occurs when they transfer assets to their child prior to filing their bankruptcy case. The trustee assigned to the case will investigate any transfers of property to determine if the parents were attempting to protect their assets from being included in their bankruptcy. This is referred to as a “fraudulent transfer” and it can cause issues in a case. A seasoned bankruptcy attorney can help you avoid these issues. Don’t get yourself into trouble – let us help you understand what assets are protected under the law before you file your case.
Please keep in mind that every bankruptcy matter is different. If you are considering filing for bankruptcy protection, and you would like to schedule a no-cost consultation to discuss your options, please contact our office by completing the form on this website or calling us at (954) 932-5377.