Are EdVest accounts exempt in bankruptcy in Wisconsin?
Posted on Mar 27, 2013 in Bankruptcy Information, Exemptions, Wisconsin
EdVest accounts are 529 College Savings Plans offered in Wisconsin. These accounts, like any other account, are considered assets in a bankruptcy. There are two ways to protect the value in these accounts:
1. Use the wild card exemption offered by the Federal statutes (up to around $11,000)
2. Use the state law exemption in Section 815.18(3)(p) of the Wisconsin Statues
These might seem to solve the problem, but they don’t. This is because a decision out of the Western District of Wisconsin called In re Bronk held that a debtor in bankruptcy cannot exempt the value in an EdVest account using the Wisconsin 815.18 exemption. The District Court in the Western District agreed, and that case is up on appeal right now to the 7th Circuit Court of Appeals in Chicago.
However, a recent case out of Milwaukee’s Eastern District of Wisconsin Bankruptcy Court disagrees with Bronk. In the case of In re Eckerman, Chief Judge Pamela Pepper held that a proper reading of the statute allows for the state protection for a debtor’s contributions to the EdVest Account.
This matter will probably be pursued on appeal in both cases before a final decision is issued. To be safe, stay tuned and be warned if you plan on using EdVest accounts to protect cash in the event of a bankruptcy filing.