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October 17, 2019

By: Steven P. Taylor
Law Office of Steven P. Taylor, P.C.

On August 23, 2019, the Honoring American Veterans in Extreme Need Act of 2019 (HAVEN Act) was signed into law.   The Haven Act provides for exclusion of disability benefits paid by the U.S. Department of Veterans Affairs and the U.S. Department of Defense from the calculation of an individual debtor’s disposable income used for bankruptcy means testing for purposes of determining whether a veteran headed for bankruptcy would have to file a Chapter 13 repayment plan case.

According to the 2018 VA Annual Benefits Report,  4.74 million US veterans—or 25 percent of the total veteran population—receive VA disability benefits.   Veterans also make up a disproportionate share of bankruptcy filers. Nearly 15 percent of both Chapter 7 and Chapter 13 bankruptcy filers are veterans, who make up approximately 10 percent of the overall population. Approximately 125,000 veterans in Indiana and across the country filed for bankruptcy in 2017 alone.

Like the Social Security Act assists those citizens receiving social security benefits, the Haven Act assists these honored veterans and their surviving dependents in obtaining an opportunity for a fresh start.  Disabled veterans have earned their disability-related benefits in defense of our nation, and these disability-related benefits honor their service and the sacrifices that they have made. Forcing disabled veterans  and their surviving dependents to dip into these funds to pay off creditors dishonors their service and sacrifice.

Prior to the HAVEN Act, a disabled veteran declaring bankruptcy must include his or her disability benefits as part of disposable income which could force the disabled veteran to file for a Chapter 13 debt reorganization bankruptcy vs. Chapter 7 bankruptcy.  By contrast, current bankruptcy law explicitly exempts Social Security disability benefits from this disposable income calculation.   The  HAVEN Act now excludes VA and DoD disability payments made to veterans or their dependent survivors from the monthly income calculation used for bankruptcy means testing as well.  Now, more disabled veterans and their surviving dependents will now be eligible to file a Chapter 7 liquidation case where only nonexempt assets are sold to pay creditors.

Not all veteran or DOD benefits are excludable from the disposable income calculation. For this reason, if you want to file for bankruptcy to obtain a fresh start, consider talking to a knowledgeable bankruptcy attorney in your area first to learn about your options.

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