Proposed Legislation Aims to Help Disabled Veterans Filing for Bankruptcy

Currently, when a disabled veteran files for personal bankruptcy, that veteran’s disability benefits are classified as disposable income. Accordingly, a disabled veteran’s benefits can be seized if that veteran files for Chapter 7 bankruptcy. Veterans’ benefits are treated differently than many other benefits in bankruptcy since most other benefits are exempt. Recognizing the harms of not protecting a disabled veteran’s benefits, two U.S. senators recently introduced a bill that is designed to make disabled veterans’ benefits exempt in bankruptcy.
According to a recent article in Military Times, Senator Tammy Baldwin and Senator John Cornyn introduced a bipartisan bill known as the Honoring American Veterans in Extreme Need Act, or the HAVEN Act for short. We want to say more about the proposed legislation and how it would help disabled veterans who file for consumer bankruptcy.
How the HAVEN Act is Designed to Help Veterans in Bankruptcy
The HAVEN Act has support from many different parties, including endorsements from “10 Republican and 10 Democratic senators.” In addition, organizations that include the American Legion and the American Bankruptcy Institute also support the bill. Those who have voiced support for the proposed legislation emphasize that it is “unfair that veterans may be forced to give up their disability benefits when declaring bankruptcy, while the general population receiving similar benefits through Social Security does not.”
Disabled veterans and their families need and rely on disability benefits. The fact that they are not exempt in bankruptcy cases often has a devastating effect on veterans who are struggling with debt. Filing for bankruptcy may be the best—or only—options for veterans in certain situations, but doing so can result in the loss of thousands of dollars in veterans’ benefits for that veteran and subsequent financial difficulties following bankruptcy.
As Senator Baldwin explained, “right now, veterans and their families are forced to dip into their disability-related benefits to pay off bankruptcy creditors . . . and that’s not right.” Baldwin emphasized that the HAVEN Act, if it passes and takes effect, “will protect veterans’ disability benefits when they fall on hard times.”
Considering Veterans’ Financial Struggles Alongside Mental Health Concerns
Not only do current rules about veterans’ disability-related benefits in bankruptcy harm a veteran’s financial situation, but those rules ultimately can have an effect on a veteran’s mental health, as well. Supporters of the HAVEN Act underscore that many veterans experience significant mental health problems, and that “one of the single greatest contributing factors to that is financial distress.”
Filing for Chapter 7 or Chapter 13 bankruptcy in general can give a consumer a fresh start and the opportunity to handle substantial debt. Most consumers do not have to worry about disability benefits being taken, or being seized, as part of a liquidation bankruptcy. The supporters of the proposed legislation highlight that the HAVEN Act could finally make that statement true for veterans and their disability-related benefits, too.
Discuss Your Case with an Oak Park Bankruptcy Attorney
If you have questions about filing for bankruptcy as a veteran, or about how bankruptcy courts handle disability benefits, you should discuss your case with an Oak Park bankruptcy attorney. An advocate at the Emerson Law Firm can talk to you today. Contact us for more information.
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