Veterans and Consumer Bankruptcy Complications

Like other consumers, veterans and military service members can have difficulty dealing with debt. For example, while a military service member is deployed or otherwise on active duty, a current salary may mean that she or he has difficulty making monthly payments on a mortgage or on credit cards. Or, perhaps, a military service member on active duty supports a spouse who has to deal with a medical emergency, and that medical emergency ends up costing thousands of dollars unexpectedly. In other situations, a veteran may have retired from the military years or even decades ago, and now may be having trouble making payments on monthly bills or may be having difficulty keeping a small business afloat.
In addition to complications that can arise for active duty service members who are considering personal bankruptcy, there are also considerations for veterans of the military who are currently receiving Veterans Disability benefits. As a recent article in Forbes explains, Veterans Disability benefits can end up preventing a veteran from passing the “means test” and being eligible for Chapter 7 bankruptcy, and this can affect veterans and their families.
Military Veterans and Financial Difficulties
When it comes to veterans who need bankruptcy protection, it can be extremely difficult to be eligible for Chapter 7 bankruptcy (or liquidation bankruptcy). As such, many veterans end up filing for Chapter 13 bankruptcy, which the article suggests can end up hurting those veterans in the long run.
Why do service members and veterans have financial problems when they have a steady income? In addition to unexpected expenses or financial emergencies, veterans can have economic difficulties even in more common scenarios. As the article argues, “service members and their families often have to shoulder a higher cost of supporting themselves—the cost of deployment, the cost of up-armoring, the cost of existing at the lower end of the economic ladder.” In addition, the article contends, “while we do a masterful job of training soldiers, we don’t do much at all in teaching life skills related to financial education and management.” As such, many veterans end up with unmanageable amounts of debt and ultimately seek bankruptcy protection.
Difficulty of Proving the Exception for Veterans Disability Benefits
Yet Chapter 7 bankruptcy can be difficult for disabled veterans. While most types of disability benefits—such as Social Security Disability (SSD) or Supplemental Security Income (SSI)—do not “count” as income when a consumer is taking the “means test” to see if she qualifies for Chapter 7 bankruptcy, Veterans Disability benefits are different.
Unlike most other disability benefits, Veterans Disability benefits are considered income when determining whether a disabled veteran is able to file for Chapter 7 bankruptcy. As such, most veterans do not qualify for Chapter 7 bankruptcy when they receive these benefits. The only exception to the rule is if the disabled veteran incurred the debts while she was an active duty member to the military. Unfortunately, this is not usually the case. In most situations, veterans begin owing significant medical debt after a military discharge, and it is often connected to the disability.
As such, it is often quite difficult for disabled veterans to get a fresh start through bankruptcy. While Chapter 13 may still be an option, the article emphasizes that Chapter 13 bankruptcy makes it more difficult for veterans to get a fresh start and that “the success rates . . . are unfortunately low.”
Contact an Oak Park Consumer Bankruptcy Lawyer
If you have questions about filing for personal bankruptcy and you are a disabled veteran, an experienced Oak Park bankruptcy lawyer can help. Contact the Emerson Law Firm for more information.
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