No matter how much advice you give to your children, there comes a day when they have to make their own decisions. It is not uncommon for children to get into financial trouble in their 20s. If your child has made a series of bad financial decisions that have led them towards bankruptcy, they may be considering chapter 7 bankruptcy. If their finances have come to the crossroads of filing for bankruptcy, they may be looking for your help and advice again. Here are some ways to help your child after chapter 7 bankruptcy.
Stop the lending
Depending on how much money you have loaned your child, they may actually be required to list you as a creditor in their bankruptcy. When they are starting the process of bankruptcy with their attorney, sit them down and explain to them how life needs to change. The first thing that you need to do is let them know that there will be no loans from the family. Many people turn to their family for financial aid during bankruptcy, but borrowing money that they can't repay is how they got towards bankruptcy.
Work out a budget
If you have an accountant or if you have been successful at budgeting, you should help your child figure out a budget based on what they can afford. Guide your child through figuring out their post-tax income and how much they have to spend and save each month after the bankruptcy goes through. A realistic budget from their family and professionals may be a necessary shock to the system. Along with the budget, encourage them to create a five and ten-year financial plan. Starting over in your 20s and creating a plan is a lot easier than starting over closer to retirement.
Encourage ways to build financial relationships
Once a person has gone through bankruptcy, there may be some companies that won't want to work with them financially. This includes car shops, credit card companies, and even rentals. Helping your child figure out how to rebuild financial relationships is a good idea. You can add your child to your credit cards as an authorized user, but shred the card so that they cannot utilize the card. Encourage your child to stay in their current apartment so that they can continue the relationship and have their lease renewed with little trouble. Encouraging your child to also repair bridges with family and friends that they may have had to list as creditors will help them to take responsibility for their actions and deal with the aftermath of negative consequences. Understanding how easily trust is broken can turn your children around from negative financial decisions in the short and long term, bulletproofing them from making the same choices again. Speak with a lawyer, like Donald T Tesch, PS, for more help.
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