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Bankruptcy – Education accounts

U.S. Court of Appeals For the Seventh Circuit


Bankruptcy – Education accounts

The statutory bankruptcy exemption for state-qualified college savings accounts covers the interest of the account owners, not just the beneficiaries.

“The general exemption for college savings accounts in section 815.18(3)(p) would have no work to do if it is limited to the beneficiary’s interest in the account, which is separately protected by section 16.641(7). Indeed, the trustee’s interpretation of section 815.18(3)(p) actually undermines the interests of college-fund beneficiaries, making section 16.641(7) ineffective. If account owners may not invoke the general exemption in section 815.18(3)(p), as the trustee suggests and the lower courts held, then a college savings plan can be reached by an account owner’s creditors, impairing the beneficiary’s right to qualified withdrawals.”

Affirmed in part, and Reversed in part.

13-1123 & 13-1516 In re: Bronk

Appeals from the United States District Court for the Western District of Wisconsin, Conley, J., Sykes, J.

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