Is Current Bankruptcy Law Hurting Disabled Veterans and Other Vulnerable Consumers?
If a consumer files for personal bankruptcy in Oak Park, Illinois, current federal bankruptcy law allows that consumer to exempt—or keep—certain assets. In other words, some property is exempt from liquidation and cannot be used in a Chapter 7 bankruptcy case to repay creditors. For most individuals who file for bankruptcy, Social Security payments always are exempt. This means that anyone receiving Social Security payments cannot be required to turn over that money to creditors in order to receive a discharge in a Chapter 7 bankruptcy case. Yet not all federal benefits are treated equally in this regard.
As a recent article in The Wall Street Journal explains, changes to the U.S. Bankruptcy Code back in 2005 have “disproportionately squeezed money from disabled veterans, retired people, and the unemployed, who have had to dip into pensions and public-assistance income to pay back debt through a much more arduous bankruptcy process.”
Not All Benefits are Exempt in a Consumer Bankruptcy Case
While Social Security benefits and other types of benefits are exempt when a consumer files for bankruptcy, this is not true of all benefits. Most notably, veterans’ disability benefits are not exempt like Social Security payments are, and as a result, many veterans who seek bankruptcy protection—some of the most vulnerable consumers in the U.S.—end up losing money that they need to thrive and in some cases to survive.
Other types of benefits also are not exempt like Social Security payments. For example, as the article points out, some “forms of public assistance and retirement payments, such as those for retired railroad workers and those receiving state pensions,” can be liquidated in some bankruptcy cases. Even teachers and government workers in some states “draw public-pension money for retirement compensation instead of Social Security payments,” opening up that retirement money to liquidation in the event of Chapter 7 bankruptcy. Lawmakers want to change some of this.
Lawmakers Propose Change to Bankruptcy Law and Benefits Exemptions
The major change that lawmakers are proposing is to allow veterans to exempt disability payments if they file for bankruptcy. Currently, there are about five million disabled veterans who receive benefits that would not be exempt in the event of bankruptcy. That same group of people “faces higher rates of homelessness, mental health problems, and debt from medical expenses deriving from combat-related injuries.” Moreover, that group is twice as likely as other consumers who have not served in the military to file for personal bankruptcy.
While it is not yet clear whether federal bankruptcy law will change, numerous lawmakers support a change to the 2005 bankruptcy law to help protect particularly vulnerable consumers, including disabled veterans and certain state pension employees.
Contact an Oak Park Bankruptcy Attorney for Advice
If you are considering filing for personal bankruptcy, or if you have questions or concerns about exemptions in the bankruptcy process, an experienced and compassionate Oak Park bankruptcy lawyer can speak with you today. Contact the Emerson Law Firm to learn more about how we can assist you.
See Related Blog Posts:
Understanding Authorized Users and Consumer Bankruptcy
“No Fair Ground of Doubt”: U.S. Supreme Court Sets Standard for Holding Bankruptcy Creditors in Civil Contempt
As a recent article in The Wall Street Journal explains, changes to the U.S. Bankruptcy Code back in 2005 have “disproportionately squeezed money from disabled veterans, retired people, and the unemployed, who have had to dip into pensions and public-assistance income to pay back debt through a much more arduous bankruptcy process.”
Not All Benefits are Exempt in a Consumer Bankruptcy Case
While Social Security benefits and other types of benefits are exempt when a consumer files for bankruptcy, this is not true of all benefits. Most notably, veterans’ disability benefits are not exempt like Social Security payments are, and as a result, many veterans who seek bankruptcy protection—some of the most vulnerable consumers in the U.S.—end up losing money that they need to thrive and in some cases to survive.
Other types of benefits also are not exempt like Social Security payments. For example, as the article points out, some “forms of public assistance and retirement payments, such as those for retired railroad workers and those receiving state pensions,” can be liquidated in some bankruptcy cases. Even teachers and government workers in some states “draw public-pension money for retirement compensation instead of Social Security payments,” opening up that retirement money to liquidation in the event of Chapter 7 bankruptcy. Lawmakers want to change some of this.
Lawmakers Propose Change to Bankruptcy Law and Benefits Exemptions
The major change that lawmakers are proposing is to allow veterans to exempt disability payments if they file for bankruptcy. Currently, there are about five million disabled veterans who receive benefits that would not be exempt in the event of bankruptcy. That same group of people “faces higher rates of homelessness, mental health problems, and debt from medical expenses deriving from combat-related injuries.” Moreover, that group is twice as likely as other consumers who have not served in the military to file for personal bankruptcy.
While it is not yet clear whether federal bankruptcy law will change, numerous lawmakers support a change to the 2005 bankruptcy law to help protect particularly vulnerable consumers, including disabled veterans and certain state pension employees.
Contact an Oak Park Bankruptcy Attorney for Advice
If you are considering filing for personal bankruptcy, or if you have questions or concerns about exemptions in the bankruptcy process, an experienced and compassionate Oak Park bankruptcy lawyer can speak with you today. Contact the Emerson Law Firm to learn more about how we can assist you.
See Related Blog Posts:
Understanding Authorized Users and Consumer Bankruptcy
“No Fair Ground of Doubt”: U.S. Supreme Court Sets Standard for Holding Bankruptcy Creditors in Civil Contempt
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