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Law Offices of Carol M. Galloway, P.A. Jacksonville Bankruptcy Lawyer
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Can Veterans File For Bankruptcy?


In the rumor mill, an idea gained traction that veterans cannot file for bankruptcy or else they will lose their military benefits. Like most rumors, it has a grain of truth to it, but it isn’t quite as onerous as implied by the rumors.

How did this rumor get started? Essentially, a veteran who collects disability payments from Social Security would not have their income counted toward the means test for Chapter 7. However, a veteran collecting disability payments from the U.S. military could. That could create a situation where the veteran was blocked from filing for Chapter 7 because of military disability pay.

Under Chapter 7 bankruptcy, you must be able to pass a means test. Those who earn too much income would be blocked from filing under Chapter 7. Those on SSD would not have disability checks counted against them toward the means test. Those with military disability, however, would.

To correct this injustice, Congress passed The HAVEN Act in 2020. However, headlines surrounding The HAVEN Act looked something like, “Congress seeks to prevent military veterans from losing benefits in bankruptcy.” That, of course, scares you into reading because now you’re thinking, “Oh my God, I need that money. What will I do?” So, you have to read the article.

How does The HAVEN Act help?

 The HAVEN Act makes it possible for a veteran to file for Chapter 7 bankruptcy without including his military disability income into the means test. This means that fewer veterans would be forced to file under Chapter 13 because they do not qualify for Chapter 7 protection. This is important, but unfortunately, the news got a bit twisted and many veterans were concerned that the benefits would be taken away if they found themselves in financial trouble. Nothing could be further from the truth. Whether or not you file for bankruptcy has no impact on whether or not you can receive military benefits.

Understanding the means test

 Eligibility for Chapter 7 is based on how much income you have. Initially, veterans collecting military disability were forced to include that income in the means test unlike others who were on social security. Today, that provision has been changed. But what does it mean?

The means test is based on the median household income for the state. If you make more than that, then you are generally barred from Chapter 7. However, what income counts depends on the current law. Today, veterans who live entirely on their military benefits would not be required to count that income toward the means test.

Talk to a Jacksonville Bankruptcy Attorney Today 

Jacksonville bankruptcy lawyer Carol Galloway represents the interests of those who are seeking bankruptcy protection. Call our Jacksonville office today to schedule a free consultation and we can begin discussing your path to financial freedom and planning your next moves immediately.

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