Veterans Get A Bankruptcy Break

It’s still amazing that the best military in the world treats its Veterans so poorly. At least Congress did something right in the bankruptcy code – and on this Veteran’s Day, I thought it is worth mentioning what lawmakers did and why the did it.

When you file for bankruptcy, you must complete the antiquated-mechanical-maniacal-draconian Means Test. Basically, it’s the “qualifying” test for a Chapter 7 bankruptcy. In 2005, banks and lobbyists were stuffing lawmaker’s pockets with gold to carve out exceptions in the bankruptcy code (so they can make more money) thereby making it harder to “qualify” for a financial fresh start. Yet Congress did do something right – creating a safe harbor for disabled veterans of America’s military who want to file for bankruptcy. According to 11 USC 707(b)(2)(D):

if the debtor (bankruptcy filer) is disabled and the indebtedness occurred primarily during a period during which he or she was—

(I) on active duty or

(II) performing a homeland defense activity

The… the Means Test would not apply to calculations of Current Monthly Income and Means Test Calculations – those are most draconian of the Means Test “austerity-like” calculations that continue to disqualify good faith debtors who really need to avail themselves of a Chapter 7 bankruptcy.

But an inconsiderate Congress in 2005 forgot about other parts of the military – Oppps! How about the National Guard, Military Reserves and others? So in 2008, Congress fixed the law and according to 11 USC 707(b)(2)(D)(ii):

While the debtor is on, and during the 540-day period (1 ½ years) beginning immediately after the debtor is released from, a period of active duty of not less than 90 days; or performing, and during the 540-day period beginning immediately after the debtor is no longer performing, a homeland defense performed for a period of not less than 90 days;

Then – once again those punitive and unforgiving calculations of the Means Test won’t apply.

Confusing – yes. But at least Congress finally got it right for the people who deserve our thanks and respect for preserving the institution that protects our liberty and happiness.

Bennett Cunningham is a Bankruptcy Attorney licensed in Texas and is a former Investigative Reporter for the CBS Television Station in Dallas. Mr. Cunningham has garnered 7 Regional Emmy Awards, including the Best Investigative Reporter in Texas 2 years in a row, as well as several National Awards for his exposés into the mismanagement of taxpayer dollars and government waste.

This blog is not meant to give you legal advice. If you need to seek legal advice, you should consult a licensed attorney in your jurisdiction.

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