A personal bankruptcy filing might involve just one person. However, the financial struggles of one individual have a tendency to affect the circumstances of others.
The finances of parents have a direct impact on the quality of life that children enjoy. If a parent decides to file for personal bankruptcy because of serious financial challenges, their choice could have an impact on their children. How and when is it appropriate to talk about bankruptcy with children?
Talk early, but keep it age-appropriate
Obviously, children don’t need a blow-by-blow recounting of every financial struggle their parents encounter. Generally, they don’t need to know when parents start contemplating bankruptcy. However, once parents make the decision or actually file the paperwork, then the time to talk is near. Public records of bankruptcy filings mean that children could hear about the bankruptcy case from someone else.
It is almost always better to bring up the topic with the children before they hear about it elsewhere. Young children probably need very few details, while older children may have far more questions about the bankruptcy process and household finances.
Keep things honest
Although it can be difficult, parents may need to explain the accumulating debt, job loss or medical issue that led to the bankruptcy. They can also briefly explain how the bankruptcy may affect the family’s finances for the foreseeable future.
Have answers for common questions
Children want to know if bankruptcy means they have to give up their phones or their furniture. They may worry about whether or not they can afford to go to college. Every family situation is different, and parents need to have answers ready for the questions that their children are likely to ask them.
Talk about financial changes
Bankruptcy often comes with a closure of revolving lines of credit and a reduction in the household standard of living. Particularly when those changes are likely to affect the children by preventing them from getting a phone or limiting what they can spend during back-to-school shopping, it is important for parents to prepare children for some of the financial changes on the horizon.
Make sure they know they aren’t to blame
Parents often crack jokes about how expensive children can be. Teenagers and preteens are often particularly aware of how expensive items can be. Children need to understand that they are not to blame for their families’ financial challenges so that they don’t internalize any guilt and develop mental health issues.
Talking calmly without placing blame, while simultaneously taking responsibility for family finances, can leave children feeling perhaps concerned but overall reassured that the family will be okay in the long run. Having a discussion about personal bankruptcy with children can be difficult, but it is a crucial conversation for the well-being of everyone in the household.