New law protects disabled veterans in bankruptcy

For military veterans in Maryland, the transition to civilian life can be difficult, especially on a financial level. This is particularly true for disabled veterans who must rely on military benefits to support their life. Medical bills and personal expenses can leave people feeling trapped amid skyrocketing debt. Indeed, the numbers bear this out. Across the country, 15% of all filers for both Chapter 7 and Chapter 13 personal bankruptcy are service veterans. This is disproportionate to veterans’ share of the overall population, which sits at 10%. In 2017 alone, over 125,000 veterans filed for bankruptcy across the country.

In the past, veterans’ disability benefits received no particular protection under bankruptcy law, unlike Social Security Disability benefits. These benefits, issued by the Department of Veterans Affairs or the Department of Defense, could be used to determine the disposable income of the individual filing for bankruptcy. This meant that these benefits were potentially exposed to creditors. In order to file for Chapter 7 bankruptcy, people must fall below a certain income threshold. For Chapter 13 bankruptcy, the filer’s disposable income is used to determine a payment plan that can persist for years. Therefore, disabled veterans were at a particular disadvantage, even compared to other people receiving different types of disability benefits.

With the HAVEN Act, which went into law on Aug. 23, these benefits are now excluded from consideration as disposable income in any bankruptcy proceedings. This provides additional protection for disabled veterans struggling with excessive debt. It passed both houses of Congress with strong bipartisan support and was backed by a range of veterans advocacy groups. There is no waiting period before the law applies.

Veterans or others who are facing a financial crisis may face collection calls, lawsuits and demands for payment. A bankruptcy lawyer can provide advice and guidance to help a client find debt relief.