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How To Protect College Funds In Bankruptcy

20th August 2010
By Bass.Franklin in Bankruptcy Law
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The cost of a college education has skyrocketed in recent years and there appears to be no end to tuition increases. For the 2009-2010 school year, the average cost of a private four-year college was $26,273, up 4.4 percent from the previous year. The percentage of increase was even greater for public schools, which rose 6.5 percent over the previous year to $7,020. What that means is on average, the cost of a four-year private college education would be more than $100,000. Unfortunately for parents who want to provide the best education possible for their children, it doesn’t look like this trend is turning around any time soon. Estimates put the increase in college tuition at double the inflation rate, which is currently between 5 and 8 percent.

Most states offer incentive programs that bring relief to parents and enable them to begin saving money from the time that their children are born. One of these options, the 529 College Savings Plan, is operated by a particular state or educational institution and helps families set aside funds for future college costs. These savings plans are beneficial for three reasons. First, they offer a targeted way to budget for your child’s college education. Secondly, they are tax sheltered assuming the funds aren’t withdrawn early. Finally, they offer safe interest-earning growth of the money. Unfortunately, they aren’t always guaranteed to get into the hands of your kids.

For individuals struggling with personal finances and debt from a job loss, personal injury, death, or divorce, repayment of debt can be nearly impossible. It can be tempting to tap into a child’s college fund to deaden the calls from creditors. Fortunately, there is a way to keep the creditors at bay without using any child’s college fund. By filing for bankruptcy, individuals can shelter debt from creditors. No other method of dealing with debt has this availability. Here’s how:

First, individuals can protect college fund money from creditors by moving the money from a 529 College Savings Plan into an account under the Uniform Gift to Minors Act or the Uniform Transfers to Minors Act. These funds are then placed under the management of a parent until a minor turns 18. From there, minors can use the funds for college without the threat of having creditors confiscate the funds to reconcile debts.

If you are seriously considering filing for bankruptcy in the Los Angeles area and want to find out more about how to protect your investments from creditors, contact the firm that focuses exclusively on California bankruptcy laws: Borowitz and Clark. Every day, the Los Angeles bankruptcy lawyers at Borowitz and Clark help people save their homes, their cars, and wipe out their debts. Not all bankruptcy attorneys are the same. While the process appears complicated, the Los Angeles bankruptcy lawyers at Borowitz and Clark will be able to help you understand your options and avoid making bad decisions. You get one chance to file bankruptcy right the first time. They know what they’re doing, because bankruptcy is all they do. Unlike many firms, they never leave a paralegal or secretary in charge of a case. That’s why their cases succeed at such a high rate—even higher than many other bankruptcy firms. For a free consultation, contact a qualified Los Angeles bankruptcy lawyers at Borowitz and Clark toll-free at 800-509-3200, or visit

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