Sponsored by State Treasurer Ma, SB 898 prevents creditors from taking higher-ed savings in bankruptcy cases
SACRAMENTO – The California State Senate today approved State Senator Bob Wieckowski’s (D-Fremont) bill to protect ScholarShare 529 savings accounts from creditors in bankruptcy cases, sending the legislation to Governor Newsom for his consideration. The bill is sponsored by California State Treasurer Fiona Ma.
“The skyrocketing cost of attaining a college degree is a great hurdle for many families,” said Senator Bob Wieckowski (D-Fremont). “But families see the long-term value in post-secondary education for their children. SB 898 ensures ScholarShare 529 accounts are protected from creditors if a family falls on hard times. That’s why I am proud to author this important legislation sponsored by state Treasurer Ma and pleased to see it pass the Legislature. 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.
“This legislation helps preserve the college dreams of young people whose families may fall on hard times because of the massive economic problems caused by COVID-19,” said Treasurer Ma. “College savings are needed now more than ever and those savings should be encouraged and protected.”
Treasurer Ma 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.
SB 898 is supported by the California Low-Income Consumer Coalition, 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.