What happens to my children if I gave them a wedding gift that I financed (like an R.C. Willey couch) and then went bankrupt?

It depends on what you want to happen.  You can wipe it out and let the creditor pick it up, or you can keep paying.

In bankruptcy, we can list that debt and get it discharged (wiped out).  Unfortunately, this means that the creditor now has every right to go pick up the financed collateral.  repo gift

I saw this a  couple of days ago in court where a client had financed a laptop for his daughter for college.  He had purchased it for her at R.C. Willey and financed it over the next couple of years.  Then, he gave it to his daughter to get her set up for her first year at the University of Utah.  At our 341 Meeting of Creditors, R.C. Willey showed up and asked what his intentions were with the laptop.  They gave him three options:

1.  he could let them go pick it up from his daughter and wipe out the debt,

2.  he could reaffirm the debt and keep paying the full balance, or

3.  he could reaffirm the debt at the current fair market value.

He chose to keep paying at the fair market value rate.  And yes, they actually would’ve have picked it up from his daughter, which would have been awfully awkward for everyone involved.

So if you finance something and then give it away as a gift, the creditor still has a secured interest.  Unless you keep paying that debt, they just may go pick it up.