Are veterans benefits income under the Chapter 7 means test?

Do veterans' benefits count as income for purposes of qualifying for Chapter 7 bankruptcy relief?

Your income affects 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 (you must pass the Chapter 7 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.

Qualifying for a Chapter 7 Discharge

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.

How the Chapter 7 Means Test Works

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.

Veterans' Benefits Count As Income

Debtors must include most sources of income on the means test. The exception is Social Security benefits, and in some states, unemployment compensation—you won’t need to include these types.

By contrast, veterans’ benefits aren’t exempt and must be figured into the means test calculations. Keep in mind that payments for many different things can be part of veterans’ benefits, such as payments for healthcare, living expenses, and disability.

For more details, see "Current Monthly Income" for the Bankruptcy Means Test.

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 that 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 that could help you determine your eligibility.

Other Means Test Exemptions

Other exemptions to the means test exist. For instance, you might be exempt if your debts are primarily business debts.

If your income is too high to qualify for a Chapter 7 discharge, learning about other exceptions to the means test or speaking with a knowledgeable bankruptcy lawyer might prove worthwhile.

Talk to a Bankruptcy Lawyer

Need professional help? Start here.

How it Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you
NEED PROFESSIONAL HELP ?

Get debt relief now.

We've helped 205 clients find attorneys today.

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you