SB 898, sponsored by Treasurer Fiona Ma, shields the accounts from creditors
SACRAMENTO – Governor Gavin Newsom today signed a bill by Senator Bob Wieckowski (D-Fremont) to protect ScholarShare 529 savings accounts from creditors in bankruptcy cases, giving families hard hit financially by the COVID 19 pandemic some much-needed security. The bill, SB 898, is sponsored by California State Treasurer Fiona Ma.
“Saving for your child’s college education is difficult enough under normal conditions, but with the economic collapse induced by the pandemic, it is especially tough for families today,” said Wieckowski. “But SB 898 gives families with ScholarShare 529 accounts the comfort of knowing that even if they must file for bankruptcy, their child’s college savings are shielded from creditors and their kids’ dreams will not be wiped out. We need more college graduates joining our workforce in the future and this bill will keep students on the path to higher education. I applaud the Governor for signing this important bill.”
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 when the bill was approved by the Legislature late last month. “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.