When declaring bankruptcy, your child might be directly involved. Their belongings might be considered for the means test calculation. This is why it’s crucial to have an open discussion with your child when considering bankruptcy.
Here is what to keep in mind:
Your child’s car
If your child drives a vehicle titled in your name, you might need to disclose it when filing for bankruptcy. If you are already subjecting your car to the state’s motor vehicle exemptions, your child’s vehicle may not be protected.
Nonetheless, the state also has a wildcard exemption that can be used on personal property, including an automobile. If you use the motor vehicle exemption on your vehicle, you can protect your child’s car with the wildcard exemption.
Note that you can either use state or federal exemptions. Consider the specific assets you own and determine the exemptions that will best protect them.
Your child’s income
Generally, your child’s income might not be considered when calculating your means tests, especially if they use their income for personal expenses. However, this might change if your child’s income regularly contributes to household expenses, such as utilities, groceries or a portion of the rent.
Your child’s valuable items
Typically, the items you purchase for your child, including toys, electronics and clothing, are considered your possessions. If your child has a valuable item like a sports cap signed by a renowned player or a collectible toy, they may be included in your assessment. Items with no resale value or that were purchased by the child are the exception to this rule.
If your child drives, has a part-time job or owns valuable items, you need to be extra cautious when filing for bankruptcy. Learn more to understand how you can protect your child’s belongings.