Sunday, September 15, 2013

Your Health Savings Account Can Be Affected In A Minnesota Bankruptcy Case

Did you know that your health savings account can be affected in a Minnesota bankruptcy case? A federal Bankruptcy Appellate Panel upheld Minnesota Bankruptcy Judge Kathleen Sandberg's original ruling that health saving accounts (HSA's) are property of a Chapter 7 bankruptcy estate.

The case that brought this issue to the forefront is Leitch v. Christians. The debtor argued that HSA's were excluded from the bankruptcy estate because of exemptions that allow a debtor to keep "disability benefits" and "payments on account of personal bodily injury." The courts disagreed since HSA's can be withdrawn for any purpose, according to Minnesota law.

Debtors could potentially protect their HSA's under the federal "wildcard" exemption, which allows for an exemption of $12,725 worth of liquid cash assets. HSA's in Chapter 13 bankruptcies will generally remain unaffected by this ruling.

If you are considering bankruptcy in Minnesota and are concerned about your HSA funds, contact Minnesota Bankruptcy Attorney Gregory J. Wald at 952-921-5802 for more information specific to your case.

Gregory J. Wald, Attorney at Law
1500 Northland Plaza
3800 American Boulevard West
Bloomington, MN 55431
Telephone: 952-921-5802
Toll Free: 1-866-747-1130
Fax: 952-831-1346
BankruptcyMinn.com
Gwald314@msn.com

Sunday, September 1, 2013

What To Do Before Considering Debt Settlement In Minnesota

If you are contemplating settling your debts with a creditor or a third party, rather than filing for bankruptcy, you may want to think again. For those who have the funds available to settle those debts, you may incur steep financial consequences.

As an example, if a debtor has $40,000 in credit card debt and has an IRA or 401(k) to draw from, withdrawing $20,000 to settle that debt could seem like a logical way to use the funds. BUT you could actually create more financial hardship as a result of a seemingly logical deed.

For starters, withdrawing money from an IRA or 401(k) will likely result in unnecessary taxes and penalties for early withdrawal. The other issue that would likely arise is the settlement of the debt. What you may not realize is that forgiveness of a debt is considered taxable income. So, the $20,000 that you thought you were off the hook for will now result in you receiving a 1099 from your creditor and paying taxes on $20,000 additional income.

Had bankruptcy been filed, most likely your debt could have been discharged without having additional financial consequences. During bankruptcy, your IRA and 401(k) could have been protected from creditors. Before considering debt settlement, contact Minnesota Bankruptcy Attorney Gregory J. Wald at 952-921-5802 for more information on the best options that suit your scenario.

Gregory J. Wald, Attorney at Law
1500 Northland Plaza
3800 American Boulevard West
Bloomington, MN 55431
Telephone: 952-921-5802
Toll Free: 1-866-747-1130
Fax: 952-831-1346
BankruptcyMinn.com
Gwald314@msn.com