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Russell G. Small

Disabled vets receive greater bankruptcy protections

Military veterans in Connecticut may be at particular risk for financial problems and challenges in their years after leaving the armed services. These challenges can be exacerbated for disabled veterans who rely on military benefits to pay the bills. Veterans may find themselves facing significant debt that they are unable to repay, and filing for bankruptcy can be an important way to seek relief. Around 15% of filers for both Chapter 7 and Chapter 13 personal bankruptcy are military veterans; however, veterans comprise only 10% of the overall population. In 2017 alone, around 125,000 American veterans filed for personal bankruptcy.

Disabled veterans often find themselves facing additional difficulties in the bankruptcy process. While Social Security Disability benefits are excluded from consideration of disposable income, many types of disability benefits provided by the Department of Veterans Affairs or the Department of Defense have not been excluded. To file for Chapter 7 bankruptcy, filers can only make below a certain income threshold. A debtor's disposable income is used to calculate a mandatory monthly payment for Chapter 13 bankruptcy. That's why disability payments have been within a creditor's reach during bankruptcy proceedings.

This has changed with the passage of the HAVEN Act of 2019. With broad bipartisan support in both houses of Congress, the law was signed and went into effect on Aug. 23. This bill equalizes the treatment of disability benefits in bankruptcy cases. It excludes a wide range of military disability benefits from consideration as part of a filer's disposable income, providing greater protection for disabled veterans.

Veterans often face significant challenges in adjusting to civilian life after leaving the military, especially if they were seriously affected by their service. Veterans looking for a new financial future can partner with an attorney who can provide representation throughout the bankruptcy process.

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