Medical Equipment Is Protected
Wheelchairs, prosthetics, hearing aids, oxygen equipment, CPAP machines, insulin pumps, and other medically necessary equipment are exempt in virtually all states. Either through specific medical equipment exemptions or through the 'health aids' or 'personal property' exemption categories. You will not lose medical equipment in bankruptcy.
Health Savings Accounts (HSAs)
HSAs have varying protection depending on the state. Many states exempt HSAs as retirement-type accounts. The federal bankruptcy exemptions (available in some states) do not specifically mention HSAs, but some courts have protected them under the wildcard exemption. If you have a significant HSA balance, check your state's exemption laws or ask your attorney.
Special Needs Trusts
Properly structured special needs trusts (also called supplemental needs trusts) are generally protected from both creditors and the bankruptcy estate. These trusts are designed to provide for disabled individuals without affecting government benefit eligibility. The key is that the trust must be irrevocable and not controlled by the beneficiary. Self-settled special needs trusts have different rules.
Insurance and Benefits
Health insurance cannot be cancelled because you file bankruptcy. COBRA rights are preserved. Medicaid and Medicare eligibility are not affected by bankruptcy. Disability benefits (SSDI, SSI, VA) continue unchanged. Health insurance premium tax credits are not affected. Essentially, all health-related benefits and protections survive bankruptcy intact.
Frequently Asked Questions
Can they take my wheelchair in bankruptcy?
No. Medical equipment necessary for health is exempt in every state. No trustee will attempt to take medically necessary equipment.
Is my HSA protected from creditors outside bankruptcy?
Protection varies by state. Some states specifically protect HSAs; others do not. Inside bankruptcy, protection depends on your state's exemption laws. Consult an attorney if you have a large HSA balance.
What about ABLE accounts for disabled family members?
ABLE accounts (Achieving a Better Life Experience) are generally protected from creditors and are excluded from means test calculations. They are designed specifically to protect savings for disabled individuals.
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