Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
By Daniel Gill
Health Savings Accounts can be claimed as exempt in bankruptcy, the Supreme Court of Montana ruled ( In re Giacometto , 2017 BL 225659, Mont., No. OP 16-0709, 6/29/17 ).
The opinion by Chief Justice Mike McGrath stressed that exemptions in Montana are required by its constitution to be construed liberally in favor of debtors.
John Charles Giacometto filed a Chapter 11 bankruptcy case on Jan. 22, 2016, and the case was converted to Chapter 7 on July 22, 2016.
In Chapter 7, a debtor’s assets are liquidated by a trustee for the benefit of creditors. However, federal and state laws allow debtors to exempt certain property interests from the bankruptcy estate which would otherwise fall under the control of the trustee.
Here, the debtor tried to claim as exempt about $14,000 he held in a Health Savings Account pursuant to Montana law. Montana is one of the states which has elected to opt out of the exemptions set forth in the bankruptcy code. The trustee objected to the claimed exemption.
Not finding any Montana appellate decisions answering whether HSAs could be claimed as exempt, the bankruptcy court asked the Montana Supreme court to weigh in.
The state high court found that state laws allowing a debtor to exempt “disability or illness benefits” and “benefits paid or payable for medical, surgical, or hospital care” would apply to HSAs, at least “to the extent that they are used or will be used to pay for the care.”
It found further support for its rulings in a recent amendment enacted by the Montana legislature that expressly added contributions to health and medical savings accounts to the lists of exemptions available in the state.
Justice Jim Rice dissented. He argued that because debtors could technically use HSA funds for non-medical purposes, albeit with certain penalties, they shouldn’t be exempt under the statute. He also said that the fact that the legislature created the new amendment reflected that the former law didn’t include HSAs.
The Chapter 7 trustee, Joseph V. Womack, Billings, Mont., represented himself. Giacometto was represented by James A. Patten, Billings, Mont.
To contact the reporter on this story: Daniel Gill in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)