VA Disability Income and the Bankruptcy Means Test

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VA Disability Income May Be Included in the Means Test

There seems to be a lot of confusion on the internet among both attorneys and non-attorneys about whether VA Disability income is used to determine whether someone passes the bankruptcy means test, which in turn means they can qualify to file Chapter 7 Bankruptcy. This post will clear up the issue and explain why the answer is: “it depends”.

When is VA Disability Income Not Included in the Means Test?

Some attorneys may tell you that VA Disability income is never included in the means test calculation since there is a box on page 1 of the means test that asks if the debtor is a “disabled veteran”. They assume that all that needs to be asked is whether the individual is a disabled veteran and if so the means test does not apply. If you talk to an attorney that tells you this, run! The fact of the matter is that there are some qualifications you must meet in order to check that box and avoid the means test. In fact the means test form (also known as Form B22A) was amended in April 2013 to make this perfectly clear. The form now states that if you check the “disabled veteran” box, you declare the following:

“I declare under penalty of perjury that I am a disabled veteran (as defined in 38 U.S.C. § 3741(1)) whose indebtedness occurred primarily during a period in which I was on active duty (as defined in 10 U.S.C. § 101(d)(1)) or while I was performing a homeland defense activity (as defined in 32 U.S.C. §901(1)).”

So what does all this mean?

How is Disabled Veteran defined?

38 U.S.C. § 3741(1) defines a disabled veteran as:

(A) a veteran who is entitled to compensation for a disability rated at 30 percent or more, or
(B) a veteran whose discharge or release from active duty was for a disability incurred or aggravated in line of duty.
In order to be able to avoid filling out the means test form you must first pass this part of the “test”.

What debt is included?

The next part of the declaration says the indebtedness (i.e. your debts) occurred primarily during a period of time you were either on active duty or performing a homeland defense activity. This means that even if you are receiving VA Disability benefits and you pass the definition of “disabled veteran” above, if your debt or most of your debt was NOT incurred while you were on active duty or performing a homeland defense activity, then you must still fill out the means test form.

How is Active Duty defined?

10 U.S.C. § 101(d)(1) defines active duty as:

“The term “active duty” means full-time duty in the active military service of the United States. Such term includes full-time training duty, annual training duty, and attendance, while in the active military service, at a school designated as a service school by law or by the Secretary of the military department concerned. Such term does not include full-time National Guard duty.”

How is Homeland Defense Activity defined? 

32 U.S.C. §901(1) defines homeland defense activity as:

“The term “homeland defense activity” means an activity undertaken for the military protection of the territory or domestic population of the United States, or of infrastructure or other assets of the United States determined by the Secretary of Defense as being critical to national security, from a threat or aggression against the United States.”

Therefore, if you are a disabled veteran whose indebtedness occurred primarily during a period in which you were on active duty or while you were performing a homeland defense activity then you do not need to fill out the means test form and your VA Disability income, and any other income you receive, is not even taken into account for the purpose of the means test form.

When is VA Disability Income Included in the Means Test?

If you do not meet the above test, then all of your income, including your VA Disability income, is included in the means test and you are required to fill out the means test form.

Why is any of this important?

The reason any of this is important and the reason any good attorney will go through the analysis is because it can make the difference between you being able to file a Chapter 7 bankruptcy and getting a discharge in 4 months or having to file a Chapter 13 bankruptcy and paying some or all of your debt back and being under bankruptcy for 3 to 5 years.

I invite you to discuss your situation with me, and I will help you understand your bankruptcy options.

Call 480-809-1014 or email me to schedule a free initial consultation with me. Weekend and evening appointments are available upon request.

We are a debt relief agency. We help individuals and businesses file for bankruptcy relief under the Bankruptcy Code.

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