Federal: Bankruptcy Trustee Has No Claim to Worker’s MSA Held in Bank Account

A Federal Bankruptcy Court in Pennsylvania has held in relevant part that a Medicare Set-Aside is not subject to administration by a bankruptcy trustee because it is not property of the bankruptcy estate in spite of the fact that it might be held in a personal bank account maintained by the Chapter 7 debtor. Finding the MSA met the legal definition of a “trust” under Maryland law, the court concluded that the injured worker/debtor only held legal title to the funds and that the MSA funds should be excluded from the bankruptcy estate under 11 U.S.C.S. § 541(d). In December 2011, the worker settled a workers’ compensation claim in Maryland under the terms of a lump sum settlement agreement giving him $225,000 in cash. In addition, $72,741.88 was paid to the injured worker as an MSA. The worker deposited all the funds in a personal checking account, subsequently purchased a modest residence and a separate piece of real estate and a pickup truck. In March 2014, he filed a Chapter 7 Bankruptcy Petition. The debtor/injured worker’s schedule of exemptions claimed both parcels of real estate as well as the MSA and the pickup truck. The bankruptcy trustee filed an objection to the schedule. The judge’s order allows the debtor/injured worker to keep both parcels of real estate, the truck, and the MSA free from creditors’ claims.

Thomas A. Robinson, J.D., the Feature National Columnist for the LexisNexis Workers’ Compensation eNewsletter, is a leading commentator and expert on the law of workers’ compensation.

LexisNexis Online Subscribers: Citations below link to Lexis Advance. Bracketed citations link to lexis.com.

See Carr v. Arelliano, 2015 Bankr. LEXIS 9 (M.D. Pa., Jan. 5, 2015) [2015 Bankr. LEXIS 9 (M.D. Pa., Jan. 5, 2015)]

See generally Larson’s Workers’ Compensation Law, § 89.10 [89.10]

Source: Larson’s Workers’ Compensation Law, the nation’s leading authority on workers’ compensation law.

For more information about LexisNexis products and solutions connect with us through our corporate site