If you are having serious financial problems and your personal debt has become overwhelming, you might want to consider filing bankruptcy. Filing for bankruptcy can be a great solution for some families when these rough financial situations are taking place. You can get protection from your creditors and a chance to eliminate your debt and start over. You should know, though, that even though filing for bankruptcy can be helpful that it will have an effect on your family. It is best to go into this process with your eyes open and aware of some of the aspects that may affect your family.

College Tuition Funds

One of the first things that families should be on the lookout for when they file bankruptcy is the state of their children’s college savings accounts. If you have been putting money aside so your kids can get a good education, you should be aware and prepared for how filing bankruptcy could affect those funds.

Your creditors may not agree that savings for your kids’ education is an important, necessary expense. They may attempt to get their hands on these funds as part of your bankruptcy proceedings. If you are liquidating and paying off as much as possible to your creditors, while trying to maintain the essential living expenses, you should know that your creditors may not have any qualms about trying to get the money from these educational savings funds.

Separate the College Funds from Your Own

The best step you can take before filing bankruptcy to minimize the impact on your children is to open a separate bank account, in your child’s name for all of the educational funds. You should never withdraw any amount of money from this account. The idea is for you to completely be separated from this money so that your creditors will have no grounds for going after it as being your money. There are specially protected types of transfers that you can use, such as the Uniform Transfer to Minors Act (UTMA) that will clear up any questions about your child having control of these funds instead of you. This can give you the peace of mind that you need in knowing that your creditors will not be able to go after these funds.

Child Support and Bankruptcy

If you are divorced and receive child support payments for your child from an ex-spouse who has filed bankruptcy, Arizona State bankruptcy laws offer protection for your child. Your ex-spouse will still be responsible for child support payments. They are not able to write-off the child support debt during any type of bankruptcy. If you have custody and file bankruptcy, your ex will still be responsible for child support payments that have been previously set up. Bankruptcy on either side should have no effect on your child receiving the decided upon payments for child support.

Deciding to file for bankruptcy is not an easy decision. Being prepared before you move forward is a great decision.