There are many questions that people in California have when they begin to consider debt relief. Some of them include ones surrounding a personal bankruptcy. For some who are parents, these inquiries may also include what happens to the money in a college savings plan.
A 529 college savings plan is one that is technically owned by the person that it is intended to benefit. If this is a child or grandchild it can be exempt in a personal bankruptcy. This is because in many cases the money is protected due to its ownership status. If the 529 plan is for the benefit of another person or the person filing for bankruptcy, the money may not be as safe in the bankruptcy case.
However, in the case of a Chapter 7 personal bankruptcy, this may not be the case. In addition, there are rules that apply relating to the timing of creating the 529 savings plan. To ensure that the best possible outcome is achieved, an individual in California may wish to review the rules relating to a college savings plan before filing for a personal bankruptcy.
Filing a personal bankruptcy can lead to many questions for people in California. However, because of the debt relief and protections from creditor collection efforts that it offers, such a filing can be a good decision for people who are unable to repay the debts that they owe. When considering how to alleviate the stress of overwhelming debts, many find that a personal bankruptcy is the best choice for their immediate needs and their future.
Source: opposingviews.com, "College 529 Plan & Bankruptcy," Beverly Bird, May 8, 2013