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One pitfall for debtors contemplating bankruptcy is contributing to an Educational Savings Account one year before filing for bankruptcy.  Generally, contributions to an education IRA under section 529 of the Internal Revenue Code (IRS) are excluded from the bankruptcy estate.  However, there are exceptions.  Under the bankruptcy code, 11 U.S.C. 541(b)(6), contributions made within one year before the petition is filed are not excluded.  Contributions greater than $5,850 per beneficiary made between two and three years before the petition is filed are not excluded either.

All is not lost if you fall into one of these exceptions.  You can still exempt these contributions under the wildcard exemption if sufficient amount is available.  Lesson learned – when contemplating bankruptcy contact a bankruptcy attorney before making any financial decisions.

Steven Striffler
Attorney At Law
21 McGrath Hwy, Suite 301
Quincy, MA 02169
617-290-1573
www.strifflerlaw.com

Practice is Focused on Bankruptcy & Construction Law

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