The HAVEN ACT of 2019
Helping American Veterans In Extreme Need
On August 23, 2019 The HAVEN Act Public Law No. 116-52 was signed into law. The HAVEN Act amends 11 U.S.C. Section 101 (10A), Definition of Current Monthly Income (CMI), in order to make it easier for Veterans to qualify for Chapter 7 Bankruptcy relief. An amendment to the Bankruptcy Code added the “Means Test”. Congress acted to prevent what they perceived as abusive Chapter 7 bankruptcy filings by individuals capable of repaying at least some of their debt by developing a needs based test. The Means Test requires all consumer debtors to disclose all of their income for the six month period preceding the date of filing. After computing the individual’s income, as defined by 11 U.S.C. Section 101(10A), that income is compared with the mean income for such an individual. If the individual is below median income no further testing is required and the individual automatically qualifies for Chapter 7 relief. If the individual’s CMI exceeds the median, there is a second part to the Means Test where certain allowable deductions against income are computed. If the individual has a certain amount of excess income after deduction of those allowable expenses the individual does not automatically qualify for Chapter 7. This article is in no way intended to thoroughly analyze 11 U.S.C. Section 101(10A). However, the point to be made is that the more CMI an individual has the less likely that individual will automatically qualify for Chapter 7 bankruptcy. Back to The HAVEN Act. 11 U.S.C. Section 101(10A), CMI, was amended to exclude “…any monthly compensation, pension, pay, annuity, or allowance paid under title 10, 37, or 38 in connection with a disability, combat-related injury or disability, or death of a member of the uniformed services, except that any retired pay excluded under this sub-clause shall include retired pay paid under chapter 61 of title 10 only to the extent that such retired pay exceeds the amount of retired pay to which the debtor would otherwise be entitled if retired under any provision of title 10 other than chapter 61 of that title.” The exclusion of the specific “compensation, pension, pay, annuity or allowance” will reduce and possibly eliminate the individual’s CMI making it more likely that the recipient will be eligible for Chapter 7 relief. The HAVEN Act excludes the payment source and basis, and it is not the individual’s status as a Veteran that allows the income to be excluded. Next, it is not all income received from the Department of Defense (DOD) of VA that is excluded. Excludable payments are limited to monthly payments under Title 38 to veterans who have a service-connected disability also known as “Service-Connected Disability Compensation” and “Veterans Compensation”. Also excluded are VA “Dependency and Indemnity Compensation”. An example of a potentially excludable payment is Title 37 Hostile Fire Pay/Imminent Danger Pay. Such pay would not be automatically excluded unless it was being paid “in connection with a disability, combat related injury or disability, or death of a member of the uniformed services”. Title 37 payments to a servicemember who was “killed, injured, or wounded by…hostile action” would be excludable. Bankruptcy counsel will require confirmation and documentation of payment types in order to determine what income is excludable. Generally available documentation includes Award Letters & Payment History, Leave & Earnings Statements, Military Discharge Document and bank statements. The VA’s Benefit Summary Letter will provide information on whether benefits are being paid based on a service-connected disability and if so what percentage of the benefit is a service-connected disability. It would be only that portion of the benefit paid on account of a service-connected disability that would be excludable. Retired Pay is not excludable even if some portion of that pay is related to a service-connected disability to the extent that the Retired Pay does not exceed “the amount of retired pay to which the debtor would otherwise be entitled if retired under any provision of Title 10 other than Chapter 61 of that title”. So only the disabled service member’s Retired Pay that exceeds the Retired Pay that he or she would’ve received without regard to the service-connected disabled would be excluded. However, all Retired Pay can be excluded if the servicemember was not otherwise eligible for retirement but for the service- connected disability. In sum, The HAVEN Act will allow only certain service connected disabled Veterans to exclude some of all of their DOD or VA Disability payments from the Chapter 7 Means Test when computing their CMI thereby permitting more veterans to obtain Chapter 7 bankruptcy relief than prior to the enactment of The HAVEN Act.