New Bankruptcy Protections for Veterans
The Honoring American Veterans in Extreme Need Act of 2019, otherwise known as the Haven Act, was recently signed into law and is expected to assist veterans of the armed forces with obtaining much needed help under the Bankruptcy Code.
Until the Haven Act became law, veterans looking to access bankruptcy relief were often stymied by the inclusion of their veteran disability benefits in the calculation of their disposable income. The disposable income test, or means test, generally establishes eligibility for Chapter 7 and also instructs would–be debtors whether they must consider Chapter 13 if their incomes surpass the disposable income test guidelines. The Haven Act will have the effect of treating most veteran’s benefits as exempt from inclusion in the means test, which should allow more veterans access to Chapter 7 bankruptcy relief. Said another way, most veterans’ disability benefits will be protected from the reach of creditors.
Recipients of benefits under the Social Security Act have long been exempt from the disposable income test. Veterans’ disability benefits have not enjoyed this exclusion. This has resulted in the disparate treatment of our Nation’s heroes as they struggle financially. In fact, one of the main purposes of the Haven Act’s enactment is to acknowledge and attempt to address the high rates of suicide among veterans, especially those related to financial strain. Historically, veterans have made up a disproportionate number of debtors in bankruptcy cases.
A non-exhaustive list of the benefits affected are as follows: Disability Retire Pay (Permanent and Temporary Disability Retirement), Disability Severance Pay, Combat-Related Special Compensation, Concurrent Retirement and Disability Payment, Survivor Benefit Plan Annuity, VA Disability Compensation, VA Veterans Pension and VA Vocational Rehabilitation & Employment Subsistence Allowance.
