Hundreds of thousands of disabled veterans have had to make an agonizing decision if they fell into serious financial difficulties. For the past 14 years, such veterans considering bankruptcy protection had to decide whether to use their monthly disability payment toward the settlement or keep spiraling downward financially since these funds are their only source of income. Under the law, debtor earnings do not include Social Security benefits but does include VA benefits.
Now, a national team of bankruptcy attorneys, dubbed the Tiger Team, have joined forces to help these disabled vets. Through their efforts, the U.S. Bankruptcy Code was tweaked so that disability benefits are no longer subject to creditors in bankruptcy proceedings. Honoring American Veterans in Extreme Need, also known as the Haven Act, was passed on August 23.
Bankruptcy and Disabled Vets
In this century, the number of U.S. military veterans receiving disability benefits has virtually doubled from the 1990s. There are now approximately 4.75 million disabled vets receiving benefits. While military vets make up just 10 percent of the population, they account for 15 percent of bankruptcies. In 2017, roughly 125,000 veterans filed bankruptcy petitions.
In a personal bankruptcy proceeding, debtors may apply for Chapter 7 bankruptcy, which discharges most debts within 90 days. Chapter 13 bankruptcy does not allow for this clean slate but requires those making a certain income to pay off the debt over a period of years.
Since disability benefits were considered disposable income, many disabled veterans did not qualify for Chapter 7 bankruptcy and were forced to file for Chapter 13 bankruptcy.
Past the Breaking Point
It is no secret that many disabled vets are vulnerable to the effects of PTSD, and drug and alcohol abuse rates, as well as suicides, are climbing. Serious financial issues put many people over the edge, even those who are physically and mentally sound.
The choice between losing benefits or continuing to fall into a fiscal hole can push many disabled vets past the breaking point, to where they take their own lives. The Haven Act may help some of these desperate vets, saving lives in the process.
The Tiger Team
The term “Tiger Team” derives from the military, where it is used to experts brought together to achieve a specific goal. The bill that later became the Haven Act was originally drafted by Senator Tammy Baldwin of Wisconsin.
It was based on a January 2017 Wisconsin case in which the judge ruled that it was up to legislators to determine whether veterans’ benefits were considered disposable income for bankruptcy purposes.
Nothing much happened to Baldwin’s bill initially, until the Tiger Team decided to take action in the summer of 2018. Meetings in Washington and recruitment of important allies took place. The team’s grassroots efforts moved forward quickly, and soon the Haven Act’s co-sponsors reached the 500 marks.
It is also a truly bipartisan effort in this increasingly partisan times, and the bill does not boost costs for the government or taxpayers.
The Haven Act became effective immediately, and word is getting out to the veteran community. Because of the tenacious efforts of the Tiger Team, thousands of disabled vets and their families can save money through modified bankruptcy plans and go on to a more stable financial future.