Medical Crisis Meets Financial Relief: How Nassau County Families Can Protect Their Health Savings While Navigating Medical Bankruptcy in 2024
Medical debt continues to devastate American families, with 41% of U.S. residents carrying some form of medical debt and 24% considering bankruptcy to solve medical debt issues. In Nassau County, where healthcare costs remain among the highest in the nation, families facing overwhelming medical bills are increasingly turning to bankruptcy protection while seeking ways to preserve their Health Savings Accounts (HSAs) and other critical financial resources.
The Growing Medical Bankruptcy Crisis in Nassau County
Recent statistics paint a sobering picture of medical bankruptcy in America. Every year, 530,000 American families file for bankruptcy due to medical bills, with medical expenses being a major reason behind 59% of bankruptcy filings. In Nassau County, this crisis is particularly acute due to the region’s high cost of living and expensive healthcare system.
Medical bills and loss of job or income are consistently the top reasons people give for filing bankruptcy, with 78% citing a decline in income and 65% citing medical issues as reasons for their bankruptcy filing. The situation has worsened in 2024, with 517,308 bankruptcy cases filed nationwide, representing a 14.2% increase from the 452,990 filed in 2023.
Understanding Health Savings Account Protection in Bankruptcy
One of the most pressing concerns for Nassau County families considering medical bankruptcy is whether they can protect their Health Savings Accounts. Unfortunately, the legal landscape for HSA protection is complex and varies significantly by state.
If you have money set aside in a Health Savings Account (HSA) and file for Chapter 7 bankruptcy, that money most likely will become part of your bankruptcy estate, and if you cannot exempt the funds, your Chapter 7 bankruptcy trustee can take the money to repay unsecured creditors.
The federal courts have generally ruled against HSA protection. In a recent case, the Bankruptcy Appellate Panel of the Eighth Circuit ruled that HSA funds are part of the bankruptcy estate, and it is likely that other courts will rule similarly. However, there are still options for protection.
State-Specific HSA Protections and Wildcard Exemptions
While New York doesn’t specifically exempt HSAs, families have alternatives. The federal bankruptcy exemptions include a wildcard exemption which can be applied to any type of property, meaning if you use federal exemptions in your Chapter 7 case, you may be able to protect HSA funds through the federal wildcard.
Some states provide better protection. You can protect HSA and MSAs in Florida, Mississippi, Oregon, Tennessee, Texas, and Virginia. Additionally, under Minnesota State exemptions there is a specific exemption for Health Savings Accounts, with the first $25,000 in a Health Savings Account exempt from bankruptcy and judgment creditors.
Strategic Planning for Medical Debt Relief
Nassau County families facing medical debt have several strategic options beyond traditional bankruptcy. Bankruptcy filing is often used by individuals to eliminate overwhelming credit card debt, medical bills, and other types of debt, or to save their real property or house from foreclosure.
The timing of bankruptcy filing is crucial. Whether you’ll be able to keep funds in your HSA will depend on specific factors: whether the court views those funds as part of your bankruptcy estate, whether your state laws specifically exempt those funds, and whether your state has a wildcard exemption that is best applied toward those funds.
Expert Legal Guidance in Nassau County
When facing medical bankruptcy, working with experienced legal counsel is essential. The Bankruptcy Law Firm Nassau County specializes in helping families navigate these complex financial challenges while protecting their assets.
Law firms concentrating in bankruptcy solutions are experienced in representing individuals and businesses in Suffolk County, Nassau County and the greater LI and NYC areas, providing foreclosure defense that gives homeowners more time and bargaining power when seeking loan modifications and other mortgage help.
Since 1993, experienced bankruptcy attorneys have provided expert bankruptcy, foreclosure defense & debt solutions in Long Island, offering free consultations and Spanish-speaking services.
The Current Healthcare Bankruptcy Landscape
The medical bankruptcy crisis shows no signs of abating. Recent studies show that 66.5% of bankruptcy filers cite at least one medical contributor—equivalent to about 530,000 medical bankruptcies annually. Even with healthcare reforms, the share of debtors reporting a medical contributor before and after the ACA’s implementation remained similar, with no evidence that trends differed between states that did versus did not accept the ACA’s Medicaid expansion.
Protecting Your Financial Future
For Nassau County families, the key to navigating medical bankruptcy while protecting HSAs lies in careful planning and expert guidance. Bankruptcy attorneys can help you understand which assets will be exempt from bankruptcy proceedings and how to best protect what you own.
The automatic stay provision provides immediate relief. A key feature of bankruptcy filing is an automatic stay that immediately occurs when bankruptcy is filed, stopping utility shut offs, debt collections, foreclosures, evictions, garnishments, attachments, repossessions and most lawsuits.
Nassau County families facing medical debt should not delay in seeking professional advice. With medical bankruptcies continuing to rise and HSA protection laws remaining complex, early intervention and strategic planning can make the difference between financial devastation and a manageable fresh start. The combination of experienced legal counsel and understanding of federal and state exemption laws provides the best path forward for families navigating this challenging financial landscape.
