Bankruptcy for Veterans: What's Different and What to Consider
Veterans often face unique financial challenges upon transitioning from active military service to civilian life. While federal programs exist to aid veterans in various aspects of life, from healthcare to home loans, the path to financial stability can still be tumultuous. Unfortunately, this leads to a heightened susceptibility to bankruptcy. This article aims to explore the nuances of bankruptcy for veterans, distinguishing key differences and considerations from conventional bankruptcy cases.
Differences in Bankruptcy Filings
The SCRA and the VCPA
The Servicemembers Civil Relief Act (SCRA) provides a range of financial protections for active-duty military members, including interest rate caps and eviction protections. For example, active duty members of the military will have certain civil obligations, such as outstanding credit card debt or mortgage payments, suspended or postponed for the duration of their active service.
These protections do not extend to veterans, but the Military & Veterans Consumer Protection Act (MVCPA) aims to fill some of these gaps by protecting veterans from predatory lenders. This act imposes a separate civil charge to citizens who commit financial crimes, such as performing a debt settlement scam, towards veterans of the military.
Chapter 7 Means Test
Veterans have a slight advantage when filing for Chapter 7 bankruptcy. According to federal bankruptcy law, veterans who are disabled due to military service are exempt from passing the “means test,” a test that measures one’s ability to repay debts and works to prevent abuse of the bankruptcy system.
Chapter 13 and Veterans’ Benefits
In a Chapter 13 bankruptcy filing, which does not include the liquidation of assets, rather it establishes a long-term repayment plan from the borrower to the lender, veterans’ benefits are considered income, which may affect the repayment plan. Veterans should consult a bankruptcy attorney experienced with veteran issues to explore this fully.
The Nature of Veterans’ Debt
Many veterans, lured by the promise of the Post-9/11 GI Bill, incur student loan debt before they are fully aware of the entitlements afforded to them by their veteran status. Veterans should exhaust their education benefits before resorting to loans, as student loan debt is generally not dischargeable in bankruptcy.
Although the Veterans Health Administration provides healthcare benefits, not all veterans are eligible or live near VA medical facilities. According to a 2019 report by CNBC, medical debt is the leading cause of bankruptcy in America, a stat that sadly includes veterans.
Veterans often face a difficult transition to civilian employment, particularly if they have mental or physical health issues stemming from service. This can lead to a vicious cycle of accumulating debt and financial insolvency.
A Bankruptcy Attorney Could Make all the Difference
Bankruptcy for veterans involves a specific set of challenges and considerations. From the nature of the debt incurred to the nuances in legal frameworks, veterans walk a unique bankruptcy path. Legal advice tailored to the complexities of veteran financial struggles is paramount for a successful bankruptcy process.