This year, the passage of the HAVEN Act brings new relief to veterans who are facing financial distress. The abbreviation stands for “Honoring American Veterans in Extreme Need,” and corrects a major problem faced by military borrowers.
Prior to the passage of the act, bankruptcy courts could use the Department of Defense disability payments to calculate disposable income. This had three major effects.
First, it impacted whether a veteran could pass the means test. Second, it meant those payments were considered when calculating Chapter 13 payments. Third, it means non-exempt disability payments can’t be seized as an asset during Chapter 7 bankruptcy.
Now, disability payments are to be given the same protection as social security payments. The act covers all forms of disability benefits, including:
- Permanent Disability Retired Pay
- Temporary Disability Retired Pay
- Retired or Disability Severance Pay
- Combat-Related Special Compensation
- Survivor Benefit Plans and Allowances
- Compensation with Assistance with Activities of Daily Living
- VA Disability Compensation
- VA Dependency and Indemnity Compensation
- VA Veteran’s Pensions
This bill passed with bi-partisan support, and brings relief to 4.74 million US veterans.
Veterans account for 15% of bankruptcy cases nationwide.
Two more laws have gone into effect which will help service men and women navigate tough financial times.
The first is the extension of the National Guard and Reservist’s Debt Relief Act. The act protects reservists by ensuring their income is always assessed at their civilian income levels, not at military ones, which might be higher when the reservist is on active duty. The law was set to expire this December, but will now remain in place for the next four years.
The law was first introduced in 2008.
The third piece of relief comes in the form of a memorandum from the Trump Administration to the Department of Education and the Department of Veteran’s Affairs. The memo instructs both departments to expedite the process for forgiving federal student loans for eligible disabled veterans.
The memo simplifies the application process for the Total and Permanent Disability Discharge program. The administration estimates that doing so will eliminate an average of $30,000 in debt owed by more than 25,000 owed by more than 25,000 eligible veterans. Permanently disabiled veterans have been eligible for this relief for many decades, but the process of obtaining it was difficult enough to prevent many from taking advantage of it.
Military.com reports that of 42,000 eligible veterans, fewer than half had accessed the program.
The act also cancels any federal income tax on the forgiven debt, and asks states to waive state taxes on the debt.