Money going into or being taken out of a Florida prepaid account is an asset but is not liable to attachment, levy, garnishment, or legal process in the state in favor of any creditor of or claimant against any program participant, purchaser, owner or contributor, or program beneficiary. There are exemptions in place to protect this money.
In Florida, Florida Statute 222.2 defines Florida’s exemption of assets in qualified tuition programs as:
“Moneys paid into or out of, the assets of, and the income of any validly existing qualified tuition program authorized by s. 529 of the Internal Revenue Code of 1986, as amended, including, but not limited to, the Florida Prepaid College Trust Fund advance payment contracts under s. 1009.98 and Florida Prepaid College Trust Fund participation agreements under s. 1009.981, are not liable to attachment, levy, garnishment, or legal process in the state in favor of any creditor of or claimant against any program participant, purchaser, owner or contributor, or program beneficiary.”
There is good reason, however, to contact an attorney. If the Trustee in your case notices that you have been putting large amounts of money into the prepaid college fund close to the time of filing for bankruptcy, they may view it as you were doing so in order to hide that money from the bankruptcy court. The rules for the Federal exemption are as follows:
- All money placed into the education savings account 2 years and longer before filing bankruptcy will be 100% exempt when filing bankruptcy.
- Money placed into the education savings account within 1 and 2 years of filing bankruptcy will only be exempt up to a certain amount. This means that any money placed into the savings plan above this set amount can be taken from the savings plan and distributed to your creditors.
- All money placed into the education savings account within 1 year of filing bankruptcy is not protected. All of it can be taken from the savings account by your Trustee and distributed to your creditors accordingly. Therefore, your money is safe from a bankruptcy trustee.
Exemptions for assets, including the Florida Prepaid College Fund, can vary, and it’s essential to consult with a qualified attorney to get accurate and up-to-date information. In general, Florida law provides various exemptions for assets during bankruptcy proceedings. However, the specific exemptions applicable to the Florida Prepaid College Fund may depend on the type of bankruptcy and other factors.
Some common exemptions that may be relevant in Florida include:
- 529 College Savings Plans: Many states, including Florida, offer protection for assets in 529 college savings plans. These plans, including the Florida Prepaid College Program, are often designed to help families save for education expenses and may be exempt from creditors during bankruptcy.
- Wildcard Exemption: Florida has a wildcard exemption that can be used for any property, including cash or other assets. This exemption allows debtors to protect a certain amount of miscellaneous property.
- Homestead Exemption: While the homestead exemption primarily applies to a person’s primary residence, it’s worth checking if any portion of the Florida Prepaid College Fund might be considered part of the homestead exemption.
- Education Savings Accounts (ESA) Exemption: In some cases, Florida law may provide exemptions for assets held in education savings accounts, including the Florida Prepaid College Fund.
It’s crucial to note that bankruptcy laws and exemptions are complex, and the application of these exemptions can vary based on individual circumstances. Consultation with a knowledgeable attorney is recommended to determine the protections that may apply to your Florida Prepaid College Fund in the context of bankruptcy or creditor claims.
