Veteran Disability Benefits Now Protected from Bankruptcy

In August 2019, President Trump signed legislation that protects veterans’ disability benefits from being seized by creditors during bankruptcy proceedings. The sponsor of the bill commented that by protecting these benefits from creditors during bankruptcy, it is possible to help veterans and their families get back on their feet after financial hardships. This article takes a brief look at these recent changes as well as offers some helpful bankruptcy advice for veterans.
The Impact of the Law
Under existing bankruptcy law, things like Social Security disability benefits and Supplemental Security Income are excluded from a person’s income. As a result, these benefits cannot be seized by creditors. The recent Honoring American Veterans in Extreme Need (HAVEN) Act amends the federal bankruptcy code to apply the same protections for veterans who receive veterans’ disability benefits. 
Veterans currently represent approximately 15% of bankruptcy filers even though they represent 10% of the population. Legislators have expressed the hope that the HAVEN Act will help to protect the economic security of veterans. It is worth noting that federal law currently does not provide the same exceptions for private disability benefits.
Other Special Bankruptcy Rules for Veterans
In addition to the HAVEN Act, there are several other bankruptcy advantages that veterans can realize, which include:

  • Means test. To qualify for Chapter 7, a person must meet certain income requirements. Military income is often included in the means test. If you are either a disabled veteran or a member of the National Guard, you might be exempt from the means test. Veterans with disabilities are not required to pass the means test if the debts being discharged were incurred during either active duty or performing activities related to homeland defense. A disabled veteran will only qualify for the exemption if either the disability has been rated 30% or more under the Secretary’s disability compensation rules or the veteran was discharged or released from active because the disability was aggravated in the line of duty. 
  • The Servicemembers Civil Relief Act. Established in 2003, this federal law provides some protection to military members from the actions of creditors. The law either prevents or postpones bank attachments, debt collection on default judgments, evictions, foreclosures, and wage garnishment. While the law is beneficial in non-bankruptcy matters, it can provide you with an added layer of protection during bankruptcy. The law can either stop or delay for 90 days or more, some type of bankruptcy actions including default judgments, debtor examination, discharge objections, post-bankruptcy evictions, and trustee actions to attach to the property.

Speak with a Skilled Bankruptcy Lawyer Today
Veterans have provided an invaluable service to our country safe, but many still face financial challenges that warrant filing for bankruptcy. While there are some laws designed to help veterans during this difficult time, the bankruptcy process can still be challenging for them for various reasons. If you are a veteran who needs legal assistance navigating the bankruptcy process, do not hesitate to speak with a seasoned bankruptcy lawyer at Adam Law Group today.