Tip of the Day for December 8, 2012: “Timing the Filing – College Funds”
When you file bankruptcy, you are allowed to keep certain property. The property you can keep is called your exempt property. Exemption laws vary from state to state. In Indiana 529(b) and 530(b) college funds are exempt but they only become exempt if you wait a year to file bankruptcy after you have made the contribution. There is also a $5,000 limit for funds held for less than two years.
So, if you have started a college fund within the last year and there is no urgent reason to file bankruptcy immediately. You should wait to file the bankruptcy and you should stop putting money in the fund until you do file the bankruptcy. If you have already saved more than $5,000, then you would want to wait until the money has been in the fund for two years before you file bankruptcy. Who knows, if you wait, maybe your finances will improve to the point where you don’t have to file bankruptcy at all.
If you have questions about what property you can keep if you file bankruptcy, call our office or send us an email at [email protected]