A college fund In bankruptcy is often exempt from the bankruptcy court and creditors. As parents many of us have struggled to make sure we set aside money in a college fund for our kids. With the ridiculous cost of college its important to plan for our children’s future. Although the government offers some aid for college students the bulk of the money owes for tuition falls on the students. A properly established college fund in bankruptcy is exempt from the creditors and the court in Oklahoma.
If you are facing the difficult decision to file bankruptcy, you’ll have dozens of questions about how it works, what you can keep, and how it could affect your future. But one part of your future you want to be sure is protected is your children’s future. If you’ve begun saving for your children’s college, you’ll want to ensure you can protect their future college fund before filing chapter 7 bankruptcy.
Where Is The Money Kept?
You might be able to keep your children’s college fund money if you hold this money in a specific account. Most parents decide to use a 529 account to save for their children’s education. Here in Oklahoma, the Oklahoma 529 College Savings Plan is also called the OCSP, and you can begin your enrollment online. The state operates the OSCP.
To set up a 529 account as a parent, you will be the account’s owner. This means that the money in the account is yours until your children turn eighteen. Many parents assume that because the money is theirs, they can lose it to bankruptcy. However, that is not the case. When setting up the 529 accounts, you must provide a beneficiary for the account. Your child will be the beneficiary of the account.
What Happens To The Money?
Under the federal bankruptcy code, exemptions exclude 529 plans from being an asset bankruptcy proceedings can seize. Under Chapter 7 and Chapter 13 bankruptcy proceedings, the 529 plan protects your children’s money.
The money in the 529 accounts must be for your child or children. If you set the account up for yourself, your grandkids, or another child in your life, the money will not be protected through bankruptcy proceedings. In this case, your creditors can claim the money and use it to pay off your debts.
How Much Is Protected?
Although some money in a 529 plan can be exempt from bankruptcy proceedings, it does not mean you can transfer all of your remaining assets into the account to prevent creditors from liquidating it during the bankruptcy. Any recent transfers into the account can be penalized. The federal bankruptcy code also only protects a specific amount of money in your 529 plan.
In a 529 plan, you will only be able to keep up to $6,225 per beneficiary safe from seizure. The money must also have been in the account for at least one year to be exempt from seizure. These extra protections are designed to prevent individuals from abusing the 529 accounts.
Our Tulsa Attorneys Protect Your Child’s Future
If you or a loved one are considering bankruptcy, the attorneys at South Tulsa Bankruptcy Lawyers can help you understand the rules and process. We can assist you through the difficult time you’re experiencing. Our Tulsa, Oklahoma attorneys are experienced in bankruptcy proceedings and ready to help you determine how to best handle your current situation while protecting your child’s future. Call (918) 739-8984 today to schedule your appointment or contact us online.
