Parents who are thinking about filing for bankruptcy may understandably worry about how the process might affect their children. While the financial consequences of bankruptcy are real, negative emotional and practical impacts of this process on your kids are not inevitable.
The ways in which you handle the situation and what kind of support you have throughout the process will help determine how your bankruptcy will impact your children, for better and/or worse.
Both positive changes and some challenges can be expected
If you are struggling with overwhelming debt, filing may be the responsible choice. It can stop wage garnishments, prevent home foreclosure and reduce the constant stress that financial hardship inspires. Children often sense when something is wrong at home. If bankruptcy helps bring stability and reduces family tension, it can actually improve your child’s environment.
However, bankruptcy can lead to some lifestyle changes. You may need to cut back on spending, move to a more affordable home or say no to certain activities. While these changes can be challenging, they are often temporary. Kids are resilient, especially when parents are honest with them in age-appropriate ways. Letting children know that things might be different for a time, but that your love and support are constant, can go a long way in reducing their anxiety.
It’s also important to understand that bankruptcy will not appear on your children’s credit reports and will not affect their ability to get financial aid for college. However, if you were counting on co-signing a loan or credit account for your child in the near future, bankruptcy might impact that. Depending on the chapter filed, it may take time to rebuild your credit to a point where co-signing is possible.
Bankruptcy can be stressful in the short term, but it also opens the door to a more stable future. Taking action now may ultimately give your family the peace of mind and fresh start it needs.
