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Victor Kearney v. Unsecured Creditors Committee

Summarizing by Amir Shachmurove

Leitch v. Christians (In re Leitch)

Leitch v. Christians (In re Leitch), No. 13-6009 (8th Cir. B.A.P. Jul. 16, 2013)
The BAP on de novo review AFFIRMED the Bankruptcy Court's determinations that: (1) the Debtor's health savings account ("HSA") was not excluded from the Debtor's bankruptcy estate pursuant to Section 541(b)(7)(A)(ii) because the HSA did not constitute a health insurance plan regulated by state law and, further, Congress would have included HSAs in Section 541(b)(7) if it intended HSAs to be excluded; and (2) the HSA could not be exempted under Section 522(d)(10)(C) or (11)(D) because the HSA funds could be used for purposes other than "disability, illness, or unemployment" and, further, Sections 522(d)(10)(C) and (11)(D) only apply to a debtor's right to receive money, not to money that has already been received. N.B.: The HSA actually contained $8,686.13, but the Bankruptcy Court accepted the Debtor's argument that the available federal wildcard exemption could be used with respect to $5,376.12 held in the HSA. The trustee did not appeal that ruling.
Procedural context:
The Debtor filed for bankruptcy protection under Chapter 7 on November 24, 2012. The bankruptcy trustee objected to the Debtor's claim that funds held in a HSA were either excluded from the bankruptcy estate or were exempt. The Debtor elected the federal exemptions. Following a hearing on March 6, 2013, the Bankruptcy Court sustained the trustee's objections with respect to $3,310.01 held in the HSA. The Debtor appealed. The BAP reviewed the Bankruptcy Court's determinations de novo and affirmed the rulings.
Kirk Patrick Leitch (the "Debtor") filed for bankruptcy protection under Chapter 7 on November 24, 2012. At issue was $3,310.01 held in a health savings account ("HSA") created pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (26 U.S.C. s. 223). The Debtor listed the HSA funds as an asset on Schedule B, but asserted they were excluded from the bankruptcy estate under Section 541(c)(2). The Debtor subsequently amended to provide that, alternatively, the funds were exempt pursuant to Sections 522(d)(10)(C) and (11)(D). The bankruptcy trustee objected. In response the Debtor argued the funds were excluded from the estate pursuant to Section 541(b)(7)(A)(ii), rather than Section 541(c)(2), and maintained the funds were exempt in the alternative. The U.S. Bankruptcy Court for the District of Minnesota (the "Bankruptcy Court") rejected the Debtor's arguments and sustained the Trustee's objections. The Debtor appealed to the U.S. Bankruptcy Appellate Panel for the Eighth Circuit (the "BAP"), which affirmed.
Federman, Saladino, Nail

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