Bankruptcy and Gifts for Your Children

Parents often become concerned about whether a bankruptcy filing will impact gifts they or others have given to their children.

When a bankruptcy case is filed, every equitable and legal property interest is shifted to the bankruptcy estate, which is then managed by a trustee and requires Brooklyn Chapter 7 Bankruptcy Attorneys.

The bankruptcy trustee’s job is to pay your creditors out of any legally exempt property or assets the law doesn’t protect. 

The lines can become muddled when attempting to distinguish what belongs to who, particularly when trying to protect your minor child’s property amid a Chapter 7 bankruptcy case hence the need for Brooklyn Bankruptcy Lawyers.

What Property is not Yours

The first thing to establish is who paid for the property when deciding whether you or your child owns a particular property. 

Although you may have given an item as a gift to your child, you have to claim a property interest in gadgets, jewelry, clothing, furniture, and other items you bought for them. 

Gifts to your child from a family member or former spouse, however, are unlikely to be part of your bankruptcy case because you do not have a legal or equitable possession stake in them. 

Your Brooklyn Chapter 7 Bankruptcy Lawyers can assist you in determining how your bankruptcy case may affect your child’s property.

If your child bought the property with their money, it is usually considered distinct property. 

For example, if your adolescent child did part-time jobs to save up enough money to buy a secondhand car, the car would be regarded as his property. 

If you contributed to the car’s acquisition, it would be considered combined property on a fraction basis.

Any bank accounts that you have with your child is considered joint if you’re unable to prove which deposits were made by them.  

The Uniform Transfers to Minors Act (UTMA) causes the rules to vary if the account was set up under it. Since, by law, the money is yours as the custodian, it remains safe. 

Transfers to this sort of account are irreversible, however any funds you put will be investigated for fraud, but Chapter 7 Bankruptcy Attorneys in Brooklyn NY can help you through that.

What Property is Excluded?

As a matter of law, some property is exempt from the bankruptcy estate. For instance, money placed into scholarly savings accounts established under section 529 of the Internal Revenue Code(IRC) is exempt from bankruptcy under section 541(b) of the Bankruptcy Code. 

However, there are certain restrictions to this security. If deposited more than two years before the filing date, funds are fully protected; if put between a year and two years, money is safeguarded up to $6,225; and if put within a year of the bankruptcy filing, the money isn’t safeguarded. 

It makes no difference where the money comes from once the debtor owns the account. This can be a trap for the unwary, particularly if a family member (such as a grandparent) invests funds into the account just before the owner declares bankruptcy.

Exempted Asset

Property that is not your child’s specific property and is not legally exempt from the bankruptcy estate is included in your bankruptcy estate in Brooklyn, New York. 

You can then use any federal or state legal exemption to safeguard your percentage property ownership interest. 

Kids’ toys, furniture, and old clothes items are rarely of interest to a Chapter 7 bankruptcy trustee because their fair market worth is insignificant. The great majority of Chapter 7 creditors retain all of their assets.

How Brooklyn Bankruptcy Attorneys Can Help

Contact Bankruptcy Attorneys in Brooklyn NY, at Ursulova Law Offices who have in-depth knowledge of bankruptcy in Brooklyn, New York City, to help you navigate your Chapter 7 Bankruptcy issues.