Monday, June 6th, 2011
Yesterday, my son graduated from high school. His class selected a math/environmental sciences teacher named Nicole Brite to deliver the faculty address to the senior class. Ms. Brite delivered a spectacular address which was meaningful, witty and thoughtful (and she received a well deserved standing ovation from both the students and the audience).
In one part of her speech, Ms. Brite turned to the graduates and said "now I am going to offer you some words of advice that I wish someone had said to me when I was leaving high school." One of the points she made I think is applicable to everyone, not just high school students.
"Stay away from credit cards," said Ms. Brite. "When you get to college, you will see tents set up by the credit card companies. They will offer you frisbees and t-shirts and free food to entice you to sign up for a credit card. They'll tell you that a credit card will help you build up your credit and you can use it only for emergencies. Don't believe it. You will be tempted to decide that an emergency takes the form of a pizza at 2 in the morning, or putting your entire fraternity's dinner on your card because no one has cash. Credit cards will mess you up."
I hope that each and every one of the graduates in my son's class heard these words of wisdom and I wish this advice could be included in the "welcome to school" packets given to incoming freshman.
Over the years I see dozens of young adults in their late 20's and early 30's who are still dealing with thousands of dollars of college years credit card debt and the associated damaged credit ratings. It is so easy to find oneself behind the proverbial eight ball, and digging out from a credit hole is a lot more difficult than avoiding the problem in the first place.
If your son or daughter recently graduated from high school, congratulations on an accomplishment and a milestone. Let your graduate know that while college isn't exactly the real world, they now have assumed the capacity to get themselves in adult level financial trouble. As uninteresting as household budgeting ten years hence may seem, they most definitely do not want their college aged mistakes to lead them to a bankruptcy lawyer's office in the future.
Posted in Advice, Consumer Protection, General consumer bankruptcy info, Georgia Bankruptcy, a, address, aged, and, applicable, brite, class, class , college, credit cards for college students, dangers of credit cards, delivered, financial advice for high school graduates, graduated, graduates, high, leaving, math environmental, mistakes, ms, named, nicole, said , school, sciences, selected, senior, spectacular, students, teacher, the, wisdom, words, years | Comments Off
Saturday, December 19th, 2009
A recent ruling by an Idaho bankruptcy judge, reported by the Des Moines Register, could mean bad news for parents with 529 tax-advantaged college savings plans for their children who file for bankruptcy.
The Ruling
The case in question apparently involved a couple who had put $14,500 into a 529 college savings account for their daughter. The girl’s grandmother reportedly contributed an additional $40,000. Ideally, the funds would have been used for the daughter’s education expenses (including textbooks, tuition, room, board and fees).
But, in this case, the girl’s parents filed for bankruptcy shortly after putting the money into the 529 account. And the judge overseeing their case ruled that the entire account (with the exception of the state’s $5,475 exemption) would be considered part of their assets and could thus be used to repay creditors.
The ruling landed this way, it seems, because the parents legally controlled the funds, and so could have used them for purposes other than their daughter’s education if they chose.
What It Means for You
So how could the Idaho bankruptcy court's ruling affect potential bankruptcy filers? If you or your relatives want to establish a 529 account for a child’s education, consider taking the following precautions:
- Invest early: Contributions made 720 days or more before a bankruptcy filing will likely be protected from the court. This provision was put in place to prevent filers from shielding their assets in 529 funds directly before a bankruptcy filing.
- Give up control: If you’re struggling financially but another family member interested in contributing education funds is not, consider keeping the account in that person’s name. That way, if you file for bankruptcy, the money will not be legally yours.
Further, the ruling in Idaho doesn’t necessarily mean that bankruptcy judges across the nation will follow suit in similar situations. While it’s likely that the same logic will be provided to other cases, it’s not guaranteed.
Besides, according to the Register, few people who file for personal bankruptcy have 529 accounts to worry about. But, if someone in your family is thinking about initiating such a fund, be sure to check with a lawyer first to make sure the money will be safe in case of a bankruptcy filing.
Additional Resources
A Guide to Understanding 529 Plans (PDF)
529 Tax Deduction Information (2009) (PDF)
Posted in 529 account, Bankruptcy Courts, Bankruptcy Laws, Idaho, college, savings accounts | Comments Off
