When filing for Chapter 7 bankruptcy, the thing that concerns most people is how much of their assets they can save. Besides the primary home and vehicle, there are other assets of great importance to debtors. One such asset is college savings. If you have some form of college savings like a 529 Plan or an Educational IRA, then you may be wondering if this asset would be protected from seizure in a Chapter 13 bankruptcy.
According to the bankruptcy code, whether a college fund is liable to seizure by the bankruptcy court depends on the time when the contribution was made. This means some part of the college fund may be liable to seizure while other parts may not. The bankruptcy code stipulates that if an amount of contribution was made at least 720 days prior to your bankruptcy filing, then this amount cannot be seized by the bankruptcy trustee.
But if an amount of contribution was made between 365 and 720 days before filing for bankruptcy, then it may be partially seized by the bankruptcy trustee to repay your creditors. And if a contribution was made less than 365 days before the day your file for bankruptcy, then the bankruptcy trustee has the right to seize it.
Suppose you have made a $20,000 contribution to your Educational IRA on August 30, 2008, another $10,000 on August 30, 2010 and finally $30,000 on August 30, 2011. And suppose you file a bankruptcy petition today, July 31, 2012. The law states that the $20,000 is not subject to seizure, while the $10,000 is partially protected and the $30,000 is not protected and thus subject to seizure.
If you wish to file for bankruptcy protection to save your college funds (or any other asset), call us at (813) 200 4133 for a free consultation.