As service members who have fought for the freedom and protection of our nation, veterans are owed a debt we can never repay. For their loyal service, veterans are allotted many benefits that were designed to protect the veterans as they grow older. What about the protection of a veteran’s assets and benefits if they fall into debt? It is no secret that veterans do not receive a large monthly stipend for living expenses once they retire from the service. They may receive free healthcare and mediocre accommodations, but they are far from receiving enough money to live on throughout retirement. Many veterans find themselves living off less than minimum wage and often cannot afford to make payments on houses, cars or other commodities.
When debt becomes overbearing and finances are not sufficient to make the payments, bankruptcy is one option that can provide relief. Bankruptcy can protect any individual from creditors, collection efforts and repossession while helping to eliminate debt. Veterans are able to receive many additional protections under bankruptcy that the average filer will not be able to obtain. Bankruptcy laws provide many exemptions for filers to protect certain assets; veterans are afforded these same exemptions and may qualify for additional bankruptcy exemptions.
In many states, the bankruptcy code allows for the filer’s homestead to be exempt from liquidation in a bankruptcy. Personal property, up to $30,000 for an individual and $60,000 for a family, is also exempt from liquidation or repossession during a bankruptcy. Bankruptcy laws protect the homestead and personal property from seizure and liquidation if the filer is prevented from paying their debts due to active military service.
Bankruptcy laws protect veteran’s benefits from seizure both before and after receipt of the benefits. Veterans are provided with the additional protection of their group insurance benefits and survivor benefits. Active military member’s wages or savings are also prohibited from garnishment during a bankruptcy. However, the veteran benefits will not qualify for this exemption if the benefits are to be seized to satisfy child support payments.
Credit Counseling Requirement
New bankruptcy laws require anyone filing for bankruptcy to complete a credit counseling course before their case can be discharged and their debts alleviated. One exception is in the case of a filer being “incapacitated, disabled or on active military duty. If the bankruptcy filer can prove impairment by reason of mental illness or disability, the credit counseling course requirement may be waived by the court. The bankruptcy code may also forgive the veteran of the credit counseling requirement if they are participating in active military duty at the time of bankruptcy.
Means Test Requirement
Bankruptcy laws also require individuals to qualify for bankruptcy through a means test, which determines your financial status. The means test analyzes the monthly income to debt ratio to evaluate the need for debt elimination due to financial hardship. Some individuals may file for a Chapter 7 bankruptcy, but due to the failure of the means test, have their case converted to a Chapter 13 bankruptcy repayment plan. The bankruptcy code prohibits dismissal or conversion of a case based on means testing for anyone that (a) is a disabled veteran and (b) obtained the debt while on active duty. If a veteran meets these two requirements, their bankruptcy case cannot be dismissed or converted to a Chapter 13 bankruptcy repayment plan, and shall remain a Chapter 7 bankruptcy debt elimination case.