Here’s a helpful article, courtesy of the Tampa Bay Bankruptcy Center –
When you file for bankruptcy protection, you will be required either to liquidate your assets to pay your debts (under Chapter 7 bankruptcy) or follow a payment plan to pay your debts over 3 to 5 years (under Chapter 13 bankruptcy). If you have children, you may be saving for their future college fees by setting up an education fund or a trust. Such a fund or trust may be in the form of a bank account. You may be wondering what happens to such an asset if you file a bankruptcy petition.
Under bankruptcy law, your child’s fund or trust is protected. In other words, the bankruptcy trustee will not take the money in such an account to pay off your debts. But there are some provisos to this, for example you have to show that this account was set up solely for your child’s education and is not used for other expenses. The evidence the court looks for would be things like the account holder’s name (it should have your child’s name as a joint account holder or be solely in his or her name), the account’s movement of funds etc.
However, under bankruptcy law, the contributions you make to your child’s future education are not deemed to be a necessary expense. Only expenses like food, utilities, rent, and medical expenses are deemed necessary. This means that the bankruptcy court can stop you from contributing towards your child’s education fund and direct you to use that money to pay your creditors instead.
Another aspect to consider is the fees for a child who is already in college. Again, such an expense is not considered a necessary expense. If your child is past 18 years of age and studying in college, the bankruptcy court can compel you to stop paying your child’s fees and sending money to him or her. Your child is deemed an adult in this case and he has to fend for himself once you file for bankruptcy.
To discuss your situation with an experience bankruptcy attorney, call The Sader Law Firm today at 816-561-1818.