Jacksonville HAVEN Act Lawyer
For many debtors, Chapter 7 bankruptcy is a lifeline which allows them to avoid drowning in debt and seek a fresh start. However, changes to the bankruptcy code have limited Chapter 7 bankruptcy to only those who cannot repay their debts. And to qualify, debtors need to pass a “means test” which compares the debtor’s income to the state’s median for a family of a similar size.
Veterans face some unique challenges passing the means test. Most veteran’s benefits will count as income, which could put them over the income threshold. If a debtor cannot file for Chapter 7 protection, the other primary option is Chapter 13, which requires participation in a repayment plan that lasts 3-5 years.
Fortunately, the Honoring American Veterans in Extreme Need Act—HAVEN Act, for short—was passed to address this problem and put Chapter 7 liquidation within reach for millions of America’s veterans. Our Jacksonville HAVEN Act lawyer can walk you through the process and file all necessary paperwork with the court.
Monthly Income & the Chapter 7 Means Test
When Congress amended the bankruptcy code in 2005, they added a means test for Chapter 7 liquidation. This bankruptcy has the advantage of immediately wiping qualifying debts, which includes most unsecured debt (apart from student loans). Congress was worried that too many people were filing for Chapter 7 when they could have otherwise paid back their debts, so Congress added a “means test” to restrict who could apply.
The means test principally compares a debtor’s “Current Monthly Income” to the state median. Veteran’s benefits end up counting as disposable income for the test. Consequently, some veterans are disqualified from filing for Chapter 7. By contrast, Social Security benefits do not count as disposable income, so there was some definite unfairness in how veterans benefits were treated under the bankruptcy code.
How the HAVEN Act Helps Veterans
The HAVEN Act excludes certain veterans benefits from the definition of Current Monthly Income found at 11 U.S.C. § 101(10A). Accordingly, the following benefits are not counted as income for purposes of the means test:
- VA Veterans Pension
- VA Dependency and Indemnity Compensation
- VA Veterans Disability Compensation
- Temporary Disability Retired Pay
- Permanent Disability Retired Pay
- Disability Severance Pay
- Retired of Disability Severance Pay for Pre-existing conditions
- Combat Related Special Compensation
- Special Survivor Indemnity Allowance
- Survivor Benefit Plan for Chapter 61 Retirees
- Special Compensation for Assistance with Activities of Daily Living
With these benefits excluded from calculations, more veterans should qualify for Chapter 7 bankruptcy.
The HAVEN Act & Chapter 13
The Act can also impact someone who chooses to file for Chapter 13 bankruptcy. Under this Chapter, debtors must contribute disposable income to their creditors for a period of 3-5 years. The advantage of Chapter 13 is that debtors do not lose property. As a tradeoff, they must pay their creditors who, in many cases, will have their entire debt repaid.
The good news: the HAVEN Act lets debtors exclude veterans benefits from their calculation of disposable income. Consequently, veterans should have more money each month to pay their living expenses.
Speak with Our Jacksonville Haven Act Lawyer
Filing for bankruptcy requires careful consideration of your options. If you are a veteran, please call our Jacksonville HAVEN Act Lawyer at the Law Offices of Carol M. Galloway, P.A. today to schedule a free consultation.