Bankruptcy offers a way out of unbearable debt, but the process of actually getting your debt discharged involves clearing lots of hurdles and jumping through lots of hoops. Unfortunately, the process is even longer and more complicated for veterans. The HAVEN Act changes this and gives veterans better access to the benefits of bankruptcy.
Considering bankruptcy and wondering what your next step is? Let Padgett & Robertson help. Call us at 251-342-0264 to set up a consultation now.
How Your Veterans’ Benefits Can Affect Bankruptcy
When you file for Chapter 7 bankruptcy, you must pass a means test. The means test looks at your various sources of income and your assets. The goal is to determine whether or not you make enough money or have enough assets to pay off your debt without resorting to bankruptcy.
For most people, this step is fairly simple. You can exclude certain items from being included in the means test since they are necessary for daily life. It is considerably more complicated for veterans since bankruptcy law requires the court to view veterans’ benefits as income. That’s right—the benefits a veteran receives for serving their country can actively work against them and keep them from seeking financial relief through bankruptcy.
Why Veterans’ Benefits Work Against You
In the past, veterans’ benefits may or may not have counted against you during bankruptcy. It was largely left up to the discretion of the judge. This all changed after the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which required courts to consider veterans’ benefits while calculating disposable income. Keep in mind that this means that veterans’ benefits are treated differently than other federal benefits, such as Social Security. Essentially, this law puts veterans in a separate class and requires them to meet stricter requirements if they want to file bankruptcy.
What is the HAVEN Act?
The HAVEN Act, short for the Honoring American Veterans in Extreme Need Act, strove to make it easier for veterans to file bankruptcy. Introduced by Senator Tammy Baldwin under the John S. McCain National Defense Authorization Act, this legislation was signed into law under President Trump.
The HAVEN Act offers veterans a wide range of benefits, including permanent disability retired pay, combat-related special compensation, and special survivor indemnity allowance. It also puts military disability benefits in the same category as Social Security disability benefits, which means that they are not counted toward an individual’s disposable income. This is a crucial benefit for veterans, who make up a disproportionate amount of bankruptcy filers. While veterans make up just 10% of the population, they comprise 15% of those who file for bankruptcy.
Your Next Steps as a Veteran
If you’ve decided against bankruptcy in the past because your military benefits disqualified you, this is the time to revisit that option and find out if it makes financial sense for you. With the passage of the HAVEN Act, veterans in financial distress may get relief from debt payments with Chapter 7 bankruptcy.
The bankruptcy process is fairly complicated, with lots of specific requirements and detailed calculations. Working with a bankruptcy attorney is the easiest way to get this process going, feel confident that you are submitting the appropriate paperwork, and meeting all of the necessary deadlines. When you meet with your bankruptcy attorney, make sure you disclose your military disability benefits and any other military benefits you receive. They will help you determine what counts as income under Chapter 7 guidelines and what is excluded.
Discuss Your Bankruptcy Claim with Padgett & Robertson
When debt overwhelms you and your day is spent dodging calls from creditors and collection agencies, it’s time to look for solutions. If you meet the qualifications for Chapter 7 bankruptcy, you may get a chance at a fresh start. The team at Padgett & Robertson is here to take a look at your assets and income, get an understanding of your financial situation, and help you decide whether or not bankruptcy is an option for you. Ready to take the first step? Call us at 251-342-0264 or to set up a consultation now.