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Is My Health Savings Account Safe in Bankruptcy?

by Adam Mack, J.D.

A Health Savings Account (HSA) can be a useful tool to help prepare for the inevitable medical expenses we all face as we age.  Unfortunately, life does not always go as planned, we are hit unexpectedly with life events that cause financial hardship, and some of us are forced to consider filing bankruptcy as an option.  If this happens to you and you own an HSA it is important to understand how filing may affect it.

First of all, with all of your assets you need to be asking whether each asset is exempt under either chapter 7 or chapter 13 or if it is an asset you may lose.  As far as HSAs are concerned, they are not exempt under Kansas bankruptcy law.  This means that if you file then the trustee may be able to administer (i.e. cash out/liquidate) the HSA.  As a practical matter, HSAs are designed to only allow withdraws for particular reasons.  For that reason, some trustees have not shown a great deal of interest in trying to administer HSAs because of complexity involved in doing so.

That said, you should not assume that the inconvenience of attempting to administer an asset is a reason not to worry about it.  If the account is worth enough money, then the trustee’s effort to collect it may be justified.  Even if you do not have much in your HSA, the money in the account is not necessarily safe.  I once saw a trustee attempt to administer $5.95 that was in a non-exempt bank account, an attempt that the trustee surely lost money on.  So needless to say, when an asset is not exempt, such as an HSA, there are no guarantees on what will happen to it, regardless of value.

As always, you should consult a qualified and experienced attorney to help you determine the risks you may face by filing bankruptcy.


These articles are for general informational use and do not constitute legal advice. Since laws change over time, it’s possible some articles are out of date and for that reason, we make no representation that the articles are fully accurate. For actual, up-to-date legal advice (including a free consultation), please contact us!