Veterans of the U. S. military sometimes struggle financially after they return from active duty.    Physical and/or emotional injuries (according to the Bureau of Labor Statistics, in 2018 an estimated 41% of Gulf War-era veterans had a disability related to their service) or a personal crisis like divorce can make it impossible for them to remain gainfully employed and catch up on debt arrears, making bankruptcy their only option.

Chapter 7 can make it possible for a struggling veteran to wipe out personal debt like medical bills, personal loans, and credit card balances. The problem is that eligibility for a Chapter 7 filing is income-based, meaning that those whose income exceeds the state threshold for their household size will have to file for Chapter 13 instead and repay those debts over time.

The U.S. Bankruptcy Code allows disabled veterans to bypass the means testing, but there’s a catch: the debts they are seeking to discharge must have been incurred during a period of active duty or homeland defense. Their disability must also have been rate at 30% or more under the rules for disability compensation or been aggravated or incurred in the line of duty and caused them to be released or discharged from active duty. Although it is a broad protection, not every veteran qualified.

Veterans who were struggling to rebuild by filing for Chapter 7 faced a setback when their Department of Veterans Affairs (VA) and Department of Defense disability payments were counted as income for the purposes of the test, even though Social Security disability benefits were (and are) exempt when calculating a bankruptcy applicant’s disposable income. Military disability income, which the recipients needed to make ends meet, could prevent them from getting the debt relief they needed.

That finally changed last summer when the HAVEN Act was signed by the President. Short for the Honoring American Veterans in Extreme Need Act of 2019, it is designed to provide veterans with more protection during bankruptcy proceedings by placing military disability income in the same exempt category as Social Security disability payments, meaning that it will not be treated as income for the purposes of the Chapter 7 means test. Veterans who were limited to a Chapter 13 filing can now obtain a quicker debt discharge under Chapter 7.

Military veterans who are thinking about filing for Chapter 7 should reach out to a New York bankruptcy attorney who can guide them through the process and help them get the fresh start they need. Now that veterans’ disability benefits are no longer counted as income, their chances of an improved outcome go up, which is nothing less than what they deserve after their service.

Call the law office of Jayson Lutzky, P.C. at 718-514-6619 if you are considering filing for bankruptcy. Mr. Lutzky offers free in-person initial consultations. He has over 36 years of legal experience. Visit to learn more.