A successful discharge from a Chapter 7 bankruptcy is a great way to get a fresh start financially. This form of bankruptcy is popular because it can resolve in under a year and result in the court wiping out the bulk of your debts. In order to prevent abuse, the bankruptcy code applies a means test to qualify for Chapter 7. If your income is above a certain level, you will not be allowed to file for Chapter 7 and will have to pursue other bankruptcy options like a Chapter 13 filing.
If you are a veteran, you may have questions about how your veteran’s benefits might affect Chapter 7 means testing. While there are a number of protections in place that prevent creditors from reaching VA benefits, these benefits are still used in calculating the means test. However, there are some important exceptions that allow some veterans to opt out of means testing entirely. If you have questions about VA benefits and bankruptcy, contact Vohwinkel Law for the answers you are looking for.
WHAT IS A MEANS TEST?
Your eligibility for a Chapter 7 bankruptcy filing depends on what is known as a means test. A means test compares your monthly household income to the median household income for the State of Nevada. The monthly median income rises as the size of the household rises. Typically, if your monthly income falls below the monthly median income for Nevada you will qualify for a Chapter 7 bankruptcy. Otherwise, you will be required to file for a Chapter 13 bankruptcy.
VA BENEFITS AS INCOME
The means test calculation takes into account every form of income other than Social Security benefits. But unlike Social Security, Veterans Affairs benefits must be included in this calculation. This includes any form of benefits granted by the VA, including money intended for living expenses and disability. While these benefits are included in the means test, some veterans can still qualify for Chapter 7 bankruptcy regardless of income.
EXCEPTIONS FOR DISABLED VETERANS
For some disabled veterans, it is unnecessary to qualify for Chapter 7 bankruptcy using the means test. However, this exception is fairly narrow. To be eligible for exempt status, you must be considered a disabled veteran under the bankruptcy code. This involves either a military discharge due to disability or a rating from the VA that you are at least 30% disabled. If the court determines you are eligible for an exemption from the means test, you will have the opportunity to file for Chapter 7 protection even if your income is higher than the Nevada median monthly income.
DISCUSS YOUR OPTIONS WITH A NEVADA BANKRUPTCY ATTORNEY
While these general guidelines are helpful in understanding how your VA benefits can affect a bankruptcy filing, the best way to have your specific questions answered is by consulting with an experienced Nevada bankruptcy attorney. For years, the bankruptcy attorneys with Vohwinkel Law have provided Nevada residents with excellent bankruptcy counsel. To discuss your case with them, contact Vohwinkel Law today to schedule your free consultation.