When your children are small, figuring out how to talk to them about money can be a challenge. As they grow up, it usually doesn’t get any easier and many kids end up on the wrong financial road. If your kids end up in financial trouble, they may need to consider filing for bankruptcy at some point. As a parent, you may need to discuss the implications of filing bankruptcy so that your adult children will understand what it will mean for them.

The Good

While you may not like the idea of your kids filing for bankruptcy, it does bring with it some benefits. If your child files for Chapter 7 bankruptcy, he’ll be able to get rid of most of his outstanding debts all at once. By filing for Chapter 13, he’ll enter into a repayment plan under the protection of the court. Either way, your child will be getting help with his debt issues with the assistance of the court. Make sure that he understands the help that he will be getting after signing up for a bankruptcy.

The Bad

Although the major benefit of filing for bankruptcy is that your child will be able to get out of debt, you need to make sure that he understands the negative consequences of doing so. Let him know that there are no guarantees that he will even qualify for bankruptcy. You have to pay to file bankruptcy and possibly pay for a lawyer, unless you plan on doing the work yourself. Then you have to complete quite a bit of paperwork listing information about your debts, your income and your expenses. It will then take some time to find out if you qualify for bankruptcy. At that point, you have to go through credit counseling, debtor’s education and a creditor’s meeting. The process of getting a bankruptcy is not exactly easy and it will be a challenge for your kids.

The Ugly

While filing for bankruptcy is not easy, it does provide a debtor with some good relief from his debt problems. After your child files for bankruptcy, his credit will effectively be ruined for the near future. Let your child know that the bankruptcy will stay on his credit report for 10 years from the date of discharge. During that time, every lender and credit card company will be able to see the blemish on his credit report. Your child will have to begin taking steps to rebuild his credit score so that he can borrow money again at some point in the future.

The decision to file for bankruptcy is not an easy one and you should walk closely with your child during this difficult time. Just make sure that he understands the pros and cons of doing so before going through with it.

Peter Wendt is a writer and researcher living in Austin, Texas.

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