Claiming Bankruptcy in Florida
Understanding how claiming bankruptcy in Florida affects your children is an important part of determining whether or not you should file. Even with serious financial concerns, you don’t want to do anything that will harm your children now or in the future. This is especially true if you’ve set aside money for your children to attend school or for other reasons.
How will filing for bankruptcy affect your children?
Many parents set up savings accounts for their kids when they are very young. This way they can slowly build savings for your child. And once they’re old enough, they can add to their savings and learn about money management.
But what happens to the money in that account if you claim bankruptcy in Florida? Is your child punished because you saved on his or her behalf?
According to the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, any money you’ve put into an account or your child is not part of a bankruptcy estate if you file. Once in the account, the money is the property of your child. The account is protected from the bankruptcy trustee if you choose to file for bankruptcy.
You can learn more about these laws here.
Setting up a college savings plan for your child is a smart move. Tuition continues to get more and more expensive and saving throughout your child’s life can reduce the amount they’ll need to borrow once it’s time to attend college.
One of the most popular options is a section 529 college savings plan. These not only allow you to put aside money, but they also offer tax benefits for you. They’re also protected from bankruptcy trustees should you choose to file.
The important thing to remember when you begin a savings plan to help your child pay for college is that the account must be set up properly. The beneficiary on the account must be your child (or your grandchild or stepchild).
It’s also important that you begin making deposits long before you file for bankruptcy. This prevents people who intend to file for bankruptcy from withholding money from the bankruptcy estate under their child’s name. Any deposits made within a year are at risk of being confiscated by the bankruptcy trustee. There’s even a chance deposits made up to two years could be confiscated if you’re claiming bankruptcy in Florida.
Property in your home is considered your property, even if your family considers it your child’s property. This means if you bought a flat-screen TV or other expensive electronics for your child and they’re the only one who uses it, the bankruptcy trustee could still confiscate it. The only way to avoid confiscation is to prove to the bankruptcy trustee that your child used his or her own money to make the purchase. The best way to avoid a problem is to save a paper trail if your child buys any expensive items with his or her own money.
The good news is bankruptcy trustees rarely confiscate household items. Some things can even be protected through exemptions. Your attorney will explain how to protect as much property as possible when you file for bankruptcy.