If you’re a veteran or Reservist living in New York you’ll want to know about some financial protections that have been put into place for you this year. These may impact whether you file for bankruptcy, and how you do so.
There are three items of interest.
Relief for Student Loans
For decades, disabled veterans have been eligible to use the Permanent Disability Discharge Program to eliminate student debt. Unfortunately, the process in the past was labyrinthine, requiring coordination between the Department of Veteran’s Affairs and the Department of Education which did not always go smoothly.
A recent memo from the Trump Administration has corrected this practice, streamlining the application process. The administration has also added tax relief: forgiven loans won’t incur federal taxes. They’ve encouraged the states to follow suit.
Relief for Reservists
In 2008 the National Guard and Reservists Debt Relief Act ensured reservist’s means would be calculated based on their civilian salaries, not their active duty salaries, which are often higher. The law would have expired this year without intervention.
This law has now been extended, and will remain in place for the next four years.
The HAVEN Act
The Honoring American Veterans in Extreme Need Act of 2019 protects Department of Defense disability payments during bankruptcy actions. This income will no longer be considered “disposable income” and will not be vulnerable to creditors.
First, it gives disabled veterans a higher chance of passing the Chapter 7 means test, as disability payments will be completely excluded from the test.
Second, in Chapter 13 cases it will reduce the effective monthly income for the veteran’s household. This means lower, more manageable payments while the borrower pays off the Chapter 13 plan.
The act protects permanent and temporary disability pay, disability severance pay, combat-related special compensation, survivor benefit plans, survivor allowances, compensation set aside for assistance with the activities of daily living, VA disability, VA dependency and indemnity compensation, and VA Veteran’s pensions.
Need help or advice?
Do these changes make it more feasible for you to get a financial fresh start? If you’d like to see how bankruptcy can impact your personal financial situation, give our office a call. You can take advantage of our free consultation and get all of your individual, unique questions answered.