A health savings account (HSA) can be a great way to set aside money to be used for health purposes. Many times, employers will match your contributions into an HSA, and if they don’t, your contributions are tax deductible. While having an HSA can be a great financial move, if you are considering filing for bankruptcy in Georgia, it is important to know how your HSA will be impacted.
Exemption Laws and HSAs
When you decide to file a Chapter 7 or Chapter 13 bankruptcy in Georgia, you will be required to report all your assets. This includes listing the funds contained in your HSA. As with most states, Georgia has its own set of exemption laws that can be used to protect the value of certain assets from creditors. In Georgia, you can only use Georgia exemptions and are not permitted to use federal bankruptcy exemptions (some states allow you to choose between state and federal exemptions). These Georgia exemption laws allow you to prevent certain assets from being taken by the Bankruptcy Trustee and sold to cover your debts.
While these exemption laws cover the value of many important assets such as your home and car, exemption laws do not cover your HSA. This law was reaffirmed in the Georgia Supreme Court case Mooney v. Webster (In re Mooney). This case went all the way to the U.S. Court of Appeals for the Eleventh Circuit, and they upheld the Georgia Supreme Court Ruling that HSAs are not exempt in Bankruptcy cases.
What this means is that HSA funds can be liquidated by a Chapter 7 Bankruptcy Trustee and given to creditors to pay off debts. Your HSA is not untouchable if you file for bankruptcy.
Get Bankruptcy Legal Advice
Even if you have an HSA account that could be impacted by a bankruptcy, if you are facing serious financial troubles, bankruptcy many still be your best option. Although the courts have held that HSA funds can be used to repay creditors, it is important to note that there may still be options to protect some or all of your HSA funds. One option would be to use the “wild card exemption”—a Georgia exemption that can be used to cover assets not protected by other exemptions. This wild card exemption has a limit ($1,200 plus up to 10k of the homestead exemption), but if unused to cover other assets, it could be applied to protecting your HSA. Because this can be complicated, it is important to speak with a skilled bankruptcy attorney. An experienced bankruptcy attorney can help you determine if using this exemption to protect your HSA is the most beneficial move for your financial situation.
At The Ballard Law Group our attorneys have a deep understanding of Georgia exemptions and how best to use them in each bankruptcy case. If you are struggling with overwhelming debt and want to know if bankruptcy is the solution to your financial situation, call 404-220-9906 to schedule a free consultation with one of our Atlanta bankruptcy attorneys at either our Lawrenceville or Atlanta locations.