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MILITARY ISSUES AND BANKRUPTCY
IMPORTANT: THIS FIRM MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR CURRENT STATUS OF ANY LAW, CASE, ARTICLE OR PUBLICATION CITED HEREIN OR LINKED TO.
WARNING – SOME OF THESE REFERENCES ARE PRE-BAPCPA.
HONORING AMERICAN VETERANS IN EXTREME NEED ACT OF 2019 “HAVEN ACT”
Social Security disability benefits are exempt from calculating a debtor’s disposable income. The HAVEN Act places military disability benefits in the same protected category as Social Security disability.
A clip from the ACT: (IV) any monthly compensation, pension, pay, annuity, or allowance paid under title 10, 37, or 38 in connection with a disability, combat-related injury or disability, or death of a member of the uniformed services, except that any retired pay excluded under this subclause shall include retired pay paid under chapter 61 of title 10 only to the extent that such retired pay exceeds the amount of retired pay to which the debtor would otherwise be entitled if retired under any provision of title 10 other than chapter 61 of that title.
Specific benefits protected under the Haven Act are:
Permanent Disability Retired Pay
Temporary Disability Retired Pay
Retired or Disability Severance Pay for Pre-Existing Conditions
Disability Severance Pay
Combat Related Special Compensation
Survivor Benefit Plan for Chapter 61 Retirees
Special Survivor Indemnity Allowance
Special Compensation for Assistance with Activities of Daily Living
VA Veterans Disability Compensation
VA Dependency and Indemnity Compensation, and
VA Veterans Pension.
A second review of benefits (from NCLC A Guide to the HAVEN Act):
I. About the HAVEN Act
The Honoring American Veterans in Extreme Need Act of 2019 (“HAVEN Act”) excludes certain benefits paid to veterans or their family members from the definition of current monthly income (“CMI”) found in the Bankruptcy Code. The HAVEN Act amends § 101(10A) of the Bankruptcy Code and supplements the 2005 amendments to the Code that excluded other government benefits, such as social security income.
II. Text of the HAVEN Act
The HAVEN Act’s language amending § 101(10A) of the Bankruptcy Code is as follows:
“Section 101(10A) of title 11, United States Code, is amended by striking subparagraph (B) and inserting the following:
(B)(i) includes any amount paid by any entity other than the debtor (or in a joint case the debtor and the debtor’s spouse), on a regular basis for the household expenses of the debtor or the debtor’s dependents (and in a join case the debtor’s spouse if not otherwise a dependent); and
(I) Benefits received under the Social Security Act (42 U.S.C. 301 et seq.);
(II) payments to victims of war crimes or crimes against humanity on account of their status as victims of such crimes;
(III) payments to victims of international terrorism or domestic terrorism, as those terms are defined in section 2331 of title 18, on account of their status as victims of such terrorism; and
(IV) any monthly compensation, pension, pay annuity, or allowance paid under title 10, 37, or 38 in connection with a disability, combat-related injury or disability, or death of a member of the uniformed services, except that any retired pay excluded under this subclause shall include retired pay paid under chapter 61 of title 10 only to the extent that such retired pay exceeds the amount of retired pay to which the debtor would otherwise be entitled if retired under any provision of title 10 other than chapter 61 of that title.”
Paragraph (IV) is the new language added by the HAVEN Act.
The new law also provides relief to a segment of the population that needs assistance. According to the 2018 VA Annual Benefits Report, 4.74 million US veterans—or 25 percent of the total veteran population—receive VA disability benefits.
HAVEN Act’s amendment to CMI (ABI article) 11/2019
Frequently Asked Questions about HAVEN Act (ABI article) 11/2019
NCLC Guide to the Haven Act (11/2019)
A PNC received a military bonus related to his reenlistment. PNC’s family situation changed and PNC could not stay in the military. PNC received an honorable discharge. An agent at the Department of Defense told PNC that in order to discharge the debt (reenlistment bonus) it must be at least 5 years old. PNC has received a letter informing of intent to garnish wages. Is there any truth behind this five year period?
Since October 2000, federal law has required repayment of retention bonuses for failure to complete the term of enlistment for which a bonus was paid, even in the case of bankruptcy, if the bankruptcy discharge was entered less than five years after the termination of the enlistment agreement.3 The current law on this issue is promulgated in Section 373 of Title 37 of the United States Code, which specifically addresses repayment of unearned portions of bonuses, incentive pay, or similar benefits. This statute, effective as of January 2008, provides in pertinent part: (a) Repayment and termination. Except as provided in subsection (b),4 a member of the uniformed services who is paid a bonus, incentive pay, or similar benefit, the receipt of which is contingent upon the member‟s satisfaction of certain services or eligibility requirements, shall repay to the United States any unearned portion of the bonus, incentive pay, or similar benefit if the member fails to satisfy such service or eligibility requirement, and the member may not receive any unpaid amounts of the bonus, incentive pay, or similar benefit after the member fails to satisfy such service or eligibility requirement.
(c) Effect of bankruptcy. An obligation to repay the United States under this section is, for all purposes, a debt owed the United States. A discharge in bankruptcy under title 11 does not discharge a person from such debt if the discharge order is entered less than five years after— (1) the date of the termination of the agreement or contract on which the debt is based; or (2) in the absence of such an agreement or contract, the date of the termination of the service on which the debt is based.