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Do VA disability payments count in a Chapter 7 means test?

On Behalf of | Oct 6, 2023 | Chapter 7 Bankruptcy

If you find yourself drowning in phone notifications or letters from debt collectors, you may consider filing for bankruptcy. With unprecedented rental rates, wage stagnation and grocery costs, you are not alone. It is understandable if you find yourself financially underwater. But, if you are a disabled veteran, you have special considerations, like whether your monthly Veterans’ Affairs compensation payments count for the Chapter 7 bankruptcy means test?

Chapter 7 and means test refresher

Bankruptcy types are named for the chapter, where they are in the United States code. Chapter 7 bankruptcy involves a process, where a trustee (a bankruptcy estate manager so to speak) identifies all the bankruptcy filer’s nonexempt assets and sells the assets off to repay creditors. A means test is used to ensure eligibility for Chapter 7 bankruptcy as it erases certain debts and is not intended for misuse by those above the means test.

Simply put, you trade off some assets in exchange for most (sometimes, all) of your debts being erased. But, there are effects to your credit report, and it may affect your ability to get loans, like mortgages or other personal loans, for some time. For Chapter 7 bankruptcy, United States law now includes a means test or an income bar to try to eliminate bankruptcy misuse by the “rich.”

VA disability compensation

You must give information regarding your income as part of the means test. Does this mean that, if you receive monthly VA compensation for disability or VA pension, you must you include that as monthly income? Generally, no.

Formerly, only Social Security payments were exempt from the means test. However, now, many VA payments, including disability compensation are exempt from the means test. You earned compensation for your service and sacrifice, and those benefits will not be used against you.

Final thoughts

If you are a veteran or a survivor of a disabled veteran and receive VA monthly payments, you may have found yourself buried in a debt. Many Americans and businesses find themselves in the same predicament. Chapter 7 bankruptcy is a way to erase debts, and while it does come with tradeoffs, it can give you a chance to wipe part of your slate clean.



Kingcade & Garcia | A Miami Law Firm