Forum Rules (Everyone Must Read!!!) (updated: 04/28/2015)

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Are Health Savings Accounts "exempt"?

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  • Are Health Savings Accounts "exempt"?

    I have had a high deductible health insurance plan and a health savings account for a number of years. It currently has a balance of about $5k (which just covers my deductible). I have suspended contributions to it currently because I'm not sure if it is exempt, and my attorney wasn't sure if it was exempt either.

    Anybody have any experience with this?

  • #2
    Think of it this way, those money are for medical needs and can be used for medical use only. Trustee can't put a limit on how much you spend on medical needs. just my thought.
    This Forum is better than any lawyer I met.


    • #3
      I think it might vary based on where you are...I *thought* I remembered seeing posts from people where they said it was NOT exempt.

      Maybe do a search and see what you come up with here on the board.


      • #4
        They are not exempt. However, you have an argument that HSA's are not property of the bankruptcy estate. See section 541 (b)(7) of the BK code.

        Exemptions apply to protect equity in assets that are otherwise property of the bankruptcy estate.
        Not being property of the estate means the property is beyond the reach of the trustee and creditors. An easy example, if you file bankruptcy, your roommates car is not your property and therefore not property of your BK Estate.


        • #5
          Perhaps it depends on your state exemptions.
          I think in Colorado where I live, I read 75% of your HSA is exempt.
          I too wonder about that and have held off for my 2010 contribution.
          I need to contribute it to pay for some dental work...but at the same time
          I wouldn't want to lose it to the bk trustee, even 25%.

          Does anyone know if the bk forms you submit when filing ask for the amount in your HSA?


          • #6
            Unfortunately, in a fast review of Google, the HSA is not exempt. The 75% no doubt takes considerations for income taxes as you must pay them if the account is taken as personal gain. I would see where this would be exempt in practicability, but with 'Bammycare, who knows if they will be around anyway. Sorry as we use one also. 'Hub
            If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.


            • #7
              Originally posted by ColoradoBell View Post
              Perhaps it depends on your state exemptions.
              I think in Colorado where I live, I read 75% of your HSA is exempt.
              I too wonder about that and have held off for my 2010 contribution.
              I need to contribute it to pay for some dental work...but at the same time
              I wouldn't want to lose it to the bk trustee, even 25%.

              Does anyone know if the bk forms you submit when filing ask for the amount in your HSA?
              It's an asset, like another asset. Thus, there are only 2 questions...

              1. Is it property of the BK estate?
              2. If yest to #1, is it exempt?


              • #8
                I'm reviving this thread to ask:

                In Colorado ,alimony income is exempt. If I used this alimony income to fund an HSA savings account and the HSA account only has alimony income in it (not comingled)
                is it exempt?


                • #9

                  Until the Trustee's objection is resolved you cannot do anything with the $$. The $$ belongs to the Chapter 7 Estate. Don't mess with it as doing so could result in the revocation of the discharge.

                  As to HSA the exempt status depends upon State law (or, if you use Federal Exemptions - those exemptions). My State does not have an exemption for HSA’s therefore funds held in such accounts are considered nothing more than $$ in the bank and the Trustee will take it.



                  • #10
                    Employer sponsored HSA's are not property of the BK estate and therefore the money in an employer sponsored HSA cannot be taken by the trustee.

                    Private HSA's are simply cash assets (in Colorado, and most states) because exemption law has not caught up with some of these newer financial instruments. As to the issue of using Alimony to fund, the argument you will run into is that you took exempt funds and converted them into non-exempt funds. So, if you used Alimony to fund an HSA, it is VERY LIKELY the court will say that once you did that, the funds lost their character as exempt alimony and are fair game once you put them in an HSA.

                    FYI, there is no exemption in Colorado for HSA for any amount.


                    • #11
                      My alimony is to be used to pay for medical expenses. (Prior to August, my alimony was for more than just medical expenses, but in August, the alimony was reduced to only pay for health insurance. Instead of paying me the cost of my health insurance, the amount X pays is less,forcing me to get a high deductible plan that costs $535/month with a $4000 bk court ruling determined that alimony is not a property right but a personal right...HHM,I have that was when a trustee was trying to take 6months of future alimony into the estate and the court said no.

                      DES: I haven't touched the HSAmoney BUT I can't pay my insurance premium , so I've lost it unless I take HSA money to pay for it.


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