In August of 2019, Congress rewarded our Veterans for their service by approving the “Honoring American Veterans in Extreme Need Act of 2019”, aka the “HAVEN Act”. The purpose of the Act is to exempt from the calculation of monthly income certain benefits paid by the Department of Veterans Affairs and the Department of Defense. The Act modified the definition of “Current Monthly Income” under the Bankruptcy Code to exclude VA benefits, in general.
What does this mean for our clients? In Bankruptcy, there are certain factors considered for whether our individual, consumer clients qualify for either a Chapter 7 or Chapter 13 Bankruptcy. A Bankruptcy under Chapter 7 of the Bankruptcy Code is a shorter process which completely discharges general, unsecured debt, with no monthly payment. If our clients do not need a Bankruptcy under Chapter 13 (for example – to cure mortgage arrears, remove a second mortgage, cure auto loan arrears, or resolve tax debt), we aim to qualify them for a Bankruptcy under Chapter 7. Prior to the HAVEN Act, VA benefits were included in the calculation of monthly income, and unfortunately may have disqualified an otherwise deserving Veteran from the ability to file a Chapter 7.
Due to the HAVEN Act, however, we can now generally exclude the VA benefits received by our clients, meaning more of our honored Veterans can qualify for Chapter 7 Bankruptcy. Even for those who may need to file under the alternative consumer chapter, the HAVEN Act could mean a significantly lower payment in a Chapter 13 Bankruptcy.
As with any law, there are exceptions. The Act did not exclude particular benefits such as monthly special compensation from the Department of Defense, and retirement pay for military personnel on the temporary disability retired list.
If you or someone you know is a Veteran struggling with debt, please contact the CGA Law Firm today to find out how we can help.
— Attorney Rohrbaugh is an associate at CGA providing assistance to clients in Estate Planning and Administration, Business Formation and Representation, Workouts, and Bankruptcy, as well as other legal needs. Reach her at [email protected] or 717.848.4900 extension 136.
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