Are Veterans Benefits Income Under the Chapter 7 Means Test?

Almost anyone can file for Chapter 7 bankruptcy. However, to receive a discharge of your qualifying debts, you must meet income requirements or qualify for an exemption from the means test. If you're like most people, your income must be low enough to pass the Chapter 7 means test—but you'll want to check to see if you're exempt, too.

Do Veterans' Benefits Count as Income on the Means Test?

Yes, veterans' benefits count as income and affect your eligibility for a Chapter 7 bankruptcy discharge—the order that wipes out obligations such as credit card balances, medical bills, and personal loans. Naturally, the higher your income, the more difficult it might be for you to qualify for a discharge and pass the Chapter 7 means test.

Bankruptcy for Veterans: Qualifying for a Chapter 7 Discharge

The lower your income, the easier it is to qualify for Chapter 7 bankruptcy. If your monthly income is less than or equal to the median income in your state, you're eligible, assuming you meet other Chapter 7 eligibility requirements, such as the rule limiting how often you can file a Chapter 7 bankruptcy and receive a discharge.

If your income is higher than the state median, you'll do calculations to determine how much disposable income remains after deducting certain expenses from your income. For more details, see Current Monthly Income for the Bankruptcy Means Test.

Are Disabled Veterans Exempt From the Means Test?

Although your veterans' benefits will count as income when filing for Chapter 7 bankruptcy, if you are a disabled veteran, you might be exempt from the means test altogether.

Means Test Exception for Disabled Veterans

If you are a disabled veteran, you might not have to take the means test to qualify for Chapter 7 bankruptcy. Veterans who can meet the following two criteria will be eligible for exempt status:

• the veteran is considered "disabled," as defined by bankruptcy law (see below), and
• the debt was incurred while on active duty or performing a homeland defense activity.

A veteran is considered disabled after receiving one of the following:

• a rating from the Veterans Administration of at least 30% disabled, or
• a military discharge due to a disability incurred in the line of duty.

If you believe you're exempt, you'll fill out the official bankruptcy form entitled Statement of Exemption from Presumption of Abuse Under §707(b)(2). On it, you'll find additional instructions to help determine eligibility.

Consult a Bankruptcy Attorney

Other ways to pass the means test exist. A knowledgeable bankruptcy lawyer can assess your financial situation and help you qualify for Chapter 7 bankruptcy.