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New law increases bankruptcy protections for veterans

Military veterans make up about 10% of the population in Texas and around the country, and about 1 in 4 receive disability benefits from the Veterans Benefits Administration. Disability benefits paid by the Social Security Administration are protected from creditors during a personal bankruptcy, but bankruptcy judges ruled in five recent cases that Veterans Affairs benefits were not, meaning that disabled veterans were required to include their VA benefits in their disposable income disclosure paperwork.

Groups such as Veterans of Foreign Wars and the American Legion were angered by this requirement and prompted Congress to set aside party differences and take action. The result of this bipartisan effort was the Honoring American Veterans in Extreme Need Act, which President Donald Trump signed into law Aug. 23. The HAVEN Act provides VA benefits, including combat-related compensation and survivor indemnity allowances, the same protection in a Chapter 7 or Chapter 13 bankruptcy case as SSA disability benefits.

The law will provide much-needed financial relief to veterans who have sacrificed much serving the United States and often face financial difficulties after leaving the military. Almost 15% of the Chapter 7 and Chapter 13 petitions filed annually are done so by veterans. In 2017 alone, about 125,000 former members of the Navy, United States Army, Air Force, Marine Corps or Coast Guard filed for personal bankruptcy.

The HAVEN Act will make it much easier for veterans who are struggling with overwhelming debt to pass the Chapter 7 means test. The means test was introduced to prevent individuals who are capable of paying back at least some of their debts from filing Chapter 7 bankruptcies. Attorneys with debt relief experience could explain how the means test is administered and go over the options available to those who do not meet the Chapter 7 requirements. Chief among these options is filing a Chapter 13 bankruptcy petition.

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