question re: 529 college prepaid savings plan

[hollyp]

We are in the process of filing Chapter 13. We are in contracts for 2 prepaid college saving plans for our 2 children and are wondering how the trustee will treat these payments and what will happen to these accounts if we are not allowed to continue making payments. Does anyone have any experience with this situation?

[junquemayle]

We just filed CH13, with our 341 scheduled for mid-December. The Schedule C lists our 529 as exempt under 11 USC 522(b)(3)(c). As exempt property, it can't be touched by the court. My understanding of 529 accounts is that you can use them for qualified educational purposes at any time. You don't need to be actively funding them to use them. So, if you don't contribute for 5 years, the balance will just earn interest and continue to grow tax free.

Our attorney told us that the Trustee "wouldn't allow" continued contributions during the plan. However, that just means that we can't include it in the proposed budget. We're going to try to scrape together at least a little each month to contribute to this account.

[debee]

We have 529 accounts too. I thought that contributions made within the last 365 days were not exempt, and contributions made within the 1-2 year window were exempt up to 5000, and contributions prior to two years were exempt so long as they were within the allowable limits. But I'm chapter 7. Not sure how that difference plays out in a ch13, or if you have to be funding 100% to keep the prior year's contributions, etc.

[momindebt]

We were told that plans couldn't be touched but that we also cant continue to make contributions-at least in the budget. We probably wont' be able to contribute to them under the plan, which bothers me since once of the reasons we declared bankruptcy is our giant student loan debt. : ( BUT, we will do the best we can to scrape up cash to send to it so it at least keeps growing.