Your children are not responsible for your debts. Bankruptcy law does not extend to your children.
Most of the time, when people are worried about student loans and bankruptcy, they’re wondering whether or not they are going to have to pay on their student loans if they have their other debts discharged in a bankruptcy. The answer to this question is yes, you will have to continue paying your student loans, unless they are more than seven years old as calculated by the National Student Loan Centre. However, this will not affect your child in most cases.
Understanding Student Loans
Parents oftentimes want to fund at least a significant portion of their child’s college education. Because of that, there are many different products available on the market to make this possible. Among them are private loans.
If you have a bankruptcy on your credit history, it may be difficult for you to get a loan to help pay for your child’s college. This is not a specific drawback of filing bankruptcy but, rather, it is simply a fact if you have bad credit it will be more difficult for you to get money and, in particular, it will be hard for you to get financial products with good interest rates and other perks that are typical of student loans.
Your child will be able to take out a student loan on their own as they normally would. Your bankruptcy does not carry over to their credit history and nothing you did financially gives them a black mark as they’re getting started out in life. Provided they qualify for financial aid based on your family’s income, any particular scholarships or other awards they have won and so forth, they will be able to get that normally and it won’t reflect on them that you had a bankruptcy.
If you do intend to cosign on a loan, however, having a bankruptcy in your recent past may make a difference there. Creditors are likely to take the signature of somebody who recently had a bankruptcy as a good reason to extend credit to someone who doesn’t have an established credit rating on their own. This is something that you want to take into account.
Talk to Your Trustee
A licensed Bankruptcy Trustee will be able to give you any other information you need on how your child might be affected by you declaring bankruptcy. The important thing to remember is that your financial history does not reflect on your child. Your child’s credit rating will not be impacted at all by the fact that you declared bankruptcy and, provided your child is smart about getting funding for college and that they keep up with their payments once they are out, they should actually get some benefits from having a student loan, given that making regular payments and staying current can increase their credit rating.