Daily News: January 25, 2019

ABI: Means Testing for Veterans’ Benefits Causes Trouble in Bankruptcy


In a recent interview for the American Bankruptcy Instiute’s latest podcast with ABI Executive Director Sam Gerdano, Jay Bender of Bradley Arant Boult Cummings, Kristina M. Stanger of Nyemaster Goode and John H. Thompson of McGuireWoods discussed the unfortunate disparity in the Bankruptcy Code’s treatment for disabled veterans who seek Chapter 7 relief.

Bender, Stanger and Thompson are members of the legislative committee of ABI’s Veterans’ Task Force, and both Stanger and Thompson are veterans of the U.S. Army. Stanger continues to serve in the Iowa National Guard.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) included VA disability payments as income under the means test for Chapter 7 relief eligibility, even though it excluded disability benefits received by individuals under the Social Security Act. Including veterans’ benefits to increase current monthly income calculation decreases the availability of Chapter 7 relief to disabled veterans as the Chapter 7 filing will be presumed abusive.

Bender pointed out that prior to BAPCPA, exclusions were made at a judge’s discretion, but with the current legislation in place, courts have no choice but to uphold the inclusion of disabled veterans’ benefits because of the specific inclusions and exclusions within the language of BAPCPA.

“BAPCPA tied their hands,” Bender said.

“We can’t imagine that there was an intent on the part of Congress,” Thompson said in regard to the inclusion of VA disability benefits in the income calculation for the means test.

The speakers said that there is a legislative remedy to fix the disparity in the Code. The “Honoring American Veterans in Extreme Need Act” (HAVEN Act) will be introduced soon to correct the Code by excluding VA disability payments from the monthly income calculation of the means test.

Stanger, Bender and Thompson all said that the fix is receiving bipartisan support in both the House and Senate and that veteran’s organizations are advocating for it. Even with the momentum, they are asking for bankruptcy practitioners to get involved in highlighting the need for the legislation and to share their anecdotes of clients affected by the current disparity in the Code.

“This is really a veteran’s issue and a veteran’s bill, and we as bankruptcy practitioners have an opportunity to impact a straightforward fix,” Stanger said.

Bender and Thompson previously wrote “Defending Our Veterans: Excluding Veterans’ Benefits from Monthly Income.” in the November 2018 ABI Journal.