President Signs HAVEN Act to Assist Veterans in Bankruptcy Matters

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President Donald Trump on Aug. 23, 2019, signed the Honoring American Veterans in Extreme Need Act of 2019 (HAVEN Act) into law. The HAVEN Act was introduced in the U.S. House of Representatives by Lucy McBath (D-Ga.) and Greg Steube (R-Fla.) to exclude disability benefits paid by the U.S. Department of Veterans Affairs and the U.S. Department of Defense from the calculation of an individual debtor's disposable income used for bankruptcy means testing. Going forward, veterans' disability benefits will not be included as income for purposes of determining whether a veteran headed for bankruptcy would have to file a Chapter 13 repayment plan case. Prior to the HAVEN Act, a veteran may have had to contribute some portion of his or her disability benefits to pay creditors. Instead, more veterans will now be eligible to file a Chapter 7 liquidation case where only nonexempt assets are sold to pay creditors.

Currently, Social Security disability benefits are excluded from income under the bankruptcy means test, and the HAVEN Act will rectify the unequal treatment of various disability benefits under bankruptcy law. Now veterans' disability benefits will be treated like Social Security benefits – neither will be treated as income. Accordingly, the HAVEN Act fixes an unintended consequence of bankruptcy means testing which disproportionately made veterans file Chapter 13 cases because they often failed the Chapter 7 means test where disability payments were treated as income. As such, veterans may now use 100 percent of their disability benefits for their own needs, and will not have to use disability benefits as a source of income to pay back creditors.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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