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The HAVEN Act extends bankruptcy protections for veterans

Military veterans in Florida and around the country were given some much-needed financial protection on Aug. 23 when President Donald Trump signed the Honoring American Veterans in Extreme Need Act into law. The HAVEN Act changes the bankruptcy code to protect Veterans Benefits Administration disability benefits from creditors when veterans file for personal bankruptcy. Disability benefits paid by the Social Security Administration are already protected in this way.

The impetus to pass the HAVEN Act was provided by five recent bankruptcy court decisions. In those cases, bankruptcy judges ruled that VA disability benefits were not protected from creditors in the same way SSA disability benefits are. Groups including Veterans of Foreign Wars and the American Legion urged Congress to take action on behalf of millions of men and women who have paid a heavy price for serving the United States, and lawmakers in both the Senate and the House of Representatives responded by giving the ensuing bill strong bipartisan support.

The law will help thousands of veterans every year. About one in four of America's approximately 4.74 million veterans receive disability benefits from the VA, and veterans account for about 15 percent of Chapter 7 and Chapter 13 personal bankruptcies filed each year in the United States. Benefits protected by the HAVEN Act include temporary and permanent disability retirement pay, disability severance pay and special compensation related to combat.

Individuals who wish to file a Chapter 7 bankruptcy petition must first pass a means test. These tests are designed to ensure that individuals who are able to pay at least some of their debts file Chapter 13 petitions instead. Attorneys with debt relief experience could explain to veterans who seek an escape from overwhelming debt that the HAVEN Act will make it far easier for them to pass a Chapter 7 means test. This is because their disability benefits will no longer be counted when their income is calculated.

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