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Michael D. Hart, P.C.
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Disabled veterans receive more protections in bankruptcy

Military veterans in Virginia may face a difficult time adjusting to their time after service, especially when it comes to financial issues. As a result, many veterans face escalating debt and may be forced to file for bankruptcy. Under a 2019 federal law, the Honoring American Veterans in Extreme Need Act -- the HAVEN Act -- disabled military veterans receive some additional protections during the bankruptcy process. This can be important in helping people decide to file and seek debt relief.

Before the law was passed, federal disability benefits from Veterans Affairs and the Department of Defense were included when calculating a person's disposable income. Chapter 7 bankruptcy filings are limited to people below a certain income threshold while filers for Chapter 13 bankruptcy must develop payment plans based on their income. Therefore, these disability payments were considered within the reach of creditors during bankruptcy proceedings for disabled veterans. The law received widespread bipartisan support in both chambers of Congress and was signed into effect on Aug. 23. It was also promoted by several veterans' advocacy organizations and had both Democratic and Republican co-sponsors in both houses.

Under the law, compensation related to disability, combat-related injury or death of a military member is not included when calculating disposable income. The same protection exists for Social Security disability benefits, so the law equalizes the treatment of disability benefits in bankruptcy law. This is particularly important as veterans make up a disproportionate percentage of people filing for bankruptcy. Almost 15% of bankruptcy filers are veterans, above their share of the country's population.

In 2017, around 125,000 veterans filed for bankruptcy to seek debt relief. Veterans facing insurmountable bills can consult with a bankruptcy attorney about Chapter 7 and Chapter 13 bankruptcy as options for a new financial future.

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