Sponsored by State Treasurer Ma, SB 898 provides protection for higher-education savings
SACRAMENTO – State Senator Bob Wieckowski’s (D-Fremont) bill to protect Golden State ScholarShare 529 savings from creditors in bankruptcy cases was approved with bipartisan support today by the state Assembly Judiciary Committee. SB 898 now goes to the Assembly floor.
“With millions of Californians unemployed as a result of the Covid-19 pandemic, we are, unfortunately, likely to see an increase in bankruptcies in the months ahead,” said Senator Wieckowski, a member of the Senate Judiciary Committee. “SB 898 is designed to protect the future education options of children and grandchildren who would be the recipients of these accounts, and whose relatives may be facing bankruptcy at no fault of the recipients.”
SB 898 exempts the state ScholarShare 529 plan from creditors in bankruptcy cases and sets the exemption amount maximum at $15,000 in the first and second year prior to filing for bankruptcy.
The bill is sponsored by California State Treasurer Fiona Ma, who is the ScholarShare 529 Investment Board chair and administers the state-sponsored college savings plan.
Created in 1999, ScholarShare 529 accounts provide families with tax-deferred growth, and withdrawals free from state and federal taxes when used for qualified higher education expenses, such as tuition and fees, books, certain room and board costs, computer equipment and other required supplies.
Unlike retirement plans, ScholarShare accounts are not afforded protection from creditor claims in California. If an account owner is faced with a judgment, the creditor can attach the account to satisfy their judgment. California is one of 22 states without state creditor protection for 529 college savings accounts.
“With families taking on additional debt because of the Covid-19 pandemic, this protection from creditors is needed now more than ever,” said Ted Mermin, director of the California Low-Income Consumer Coalition.
In addition to CLICC, SB 898 is also supported by Housing and Economic Rights Advocates and Consumer Action.
Senator Wieckowski represents the 10th District, which includes southern Alameda County and parts of Santa Clara County.