How will my bankruptcy or consumer proposal affect my children’s bank accounts?

Impact of Bankruptcy or Consumer Proposal on Children’s Bank Accounts

Many individuals find themselves asking, “How will my bankruptcy or consumer proposal affect my children’s bank accounts?” This is a valid concern, especially when trying to safeguard their future amidst personal financial turmoil. This article aims to provide a comprehensive guide on the subject.

Contemplating bankruptcy or a consumer proposal is a complex process filled with concerns about various financial aspects, particularly children’s savings. It’s crucial to understand the implications of these debt relief options on children’s bank accounts.

Understanding Bankruptcy and Consumer Proposal

Before diving into the specifics of how children’s bank accounts are affected, it’s essential to understand what bankruptcy and consumer proposals entail.


Bankruptcy is a legal process that offers individuals relief from substantial and unmanageable debt. It involves the liquidation of assets to repay creditors. However, certain assets, referred to as “exempt assets,” are protected under bankruptcy laws.

Consumer Proposal

A consumer proposal, on the other hand, is a legally binding process governed by the Bankruptcy and Insolvency Act. It involves making a proposal to your creditors to pay back a percentage of what is owed, extend the time you have to pay off the debts, or both. Unlike bankruptcy, assets aren’t sold in a consumer proposal.

Children’s Bank Accounts: A Closer Look

Children’s bank accounts, often set up by parents or guardians, aim to secure a child’s financial future. The nature of these accounts and how they’re set up can significantly impact how they’re treated in a bankruptcy or consumer proposal.

Trust Accounts

Trust accounts are set up in the child’s name, with a trustee appointed to manage the account until the child reaches a certain age. These accounts are typically safe from bankruptcy proceedings if correctly set up and managed.

Joint Accounts

Joint accounts are held by more than one person, with all parties having access to the account’s funds. If a parent and child share a joint account, the funds may be at risk during a bankruptcy process.

The Impact of Bankruptcy on Children’s Bank Accounts

In a bankruptcy situation, the impact on your children’s savings accounts will depend on how those accounts were set up.

Trust Accounts

If a child’s account is set up in the name of the child and marked as a trust account, it typically won’t be part of the bankruptcy and will remain in place for your child.

Joint Accounts

If the account is in your name or held jointly by you and your child, the funds may be considered an asset and may be seized by the trustee in bankruptcy.

The Impact of Consumer Proposal on Children’s Bank Accounts

In the case of a consumer proposal, children’s bank accounts are usually safe. As with most assets in a proposal, your trustee should be informed about them, but any accounts in your children’s names will not be touched.

Preventing Potential Risks

To protect your child’s savings in the event of bankruptcy or a consumer proposal, consider setting up a trust account in the child’s name. This ensures that the funds belong to the child and cannot be accessed for debt repayment.

However, it’s crucial to set up this account well before any financial trouble arises. If an account is set up just before filing for bankruptcy or a consumer proposal, it may be seen as a way to hide assets and could be subject to seizure.

Legal Implications and Advice

The legal landscape around bankruptcy, consumer proposals, and their impact on children’s bank accounts can be complex. It’s always wise to seek legal advice to navigate these issues and ensure the best outcome for your children’s financial future.

The Role of a Trustee

A trustee plays a vital role in both bankruptcy and consumer proposals. They are responsible for administering the proceedings, including seizing assets in a bankruptcy or negotiating with creditors in a consumer proposal. They should also provide advice and guidance on how your decision will impact all aspects of your financial situation, including your children’s bank accounts.

Further Consultation

If you’re considering bankruptcy or a consumer proposal and are concerned about the impact on your children’s bank accounts, it’s advisable to consult with a financial advisor or bankruptcy professional. They can provide personalized advice based on your specific circumstances.


While bankruptcy or a consumer proposal can be challenging, understanding their impact on your children’s bank accounts can help you protect their financial future. With proper planning and advice, you can navigate these financial challenges successfully.

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