Disabled Veterans Finally Get Bankruptcy Protection

Illinois veterans injured in the line of duty are entitled to monetary benefits under federal law. However, these benefits do not compensate for the loss of wages or the medical bills that pile up quickly. Those facing severe financial circumstances could file bankruptcy, but it came at a high cost. Until recently, veterans often had to relinquish some of their federal benefits and sacrifice assets to get a small amount of relief.

However, after the passage of Honoring American Veterans in Extreme Need Act of 2019, disabled veterans finally have greater protections. They are exempt from the means test that debtors must take before qualifying for bankruptcy. Benjamin Brand, LLP can help you determine if bankruptcy is right for you and the best way to proceed.

Before the HAVEN Act

Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005. It prevented many Chicagoland residents from filing Chapter 7, which could discharge most debt. Instead, the option was filing Chapter 13. It restructures debt, setting up a three to five-year repayment plan. Under this form of bankruptcy, the Department of Defense and Federal Department of Affairs payments were considered disposable income. As a result, creditors could claim those funds.

Chicago Bankruptcy Means Test

This test determines who qualifies for debt forgiveness through Chapter 7 bankruptcy. It takes income, family size and expenses to determine if you have enough disposable income to repay debts. If your income is below the Illinois median income, you may qualify. Expenses for the last six months, from clothing and groceries to doctor’s bills and rent/mortgage make up allowable expenses. Personal disposable income is calculated by subtracting income taxes from income, also referred to as net pay.

After the HAVEN Act

Bankruptcy law no longer views VA benefits as disposable income. They are similar to Social Security benefits, which are already exempt. This makes it easier for disabled veterans to qualify for Chapter 7 bankruptcy. Income sources that are now excluded from the means test include:

  • Combat-Related Special Compensation
  • Survivor Benefit Plan for Chapter 61 Retirees
  • Disability & Death Benefits
  • Disability Severance Pay
  • Permanent & Temporary Disability Retired Pay
  • Special Compensation for Assistance with Activities of Daily Living

Retired military personnel make up nearly 10% of the United States population. However, they comprise almost 15% of those who file for bankruptcy. Chapter 7 bankruptcy gives disabled veterans and their families the ability to get out from under crushing debt caused by unemployment and overwhelming medical expenses. 

Whether you’re in the Heart of Chicago, Tri-Taylor or Little Italy, I am nearby and ready to help. Call me at 312-853-3100 or schedule an appointment to learn more about your options for handling bankruptcy, foreclosure and student loan debt. We can meet at my West Loop office, teleconference use video for the consultation.

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