Disabled Veterans Exempt From the Means Test

The Means test is one of the new provisions enacted by the 2005 Bankruptcy act (BAPCPA). This test determines whether debtors, based on their respective incomes, qualify for a chapter 7 bankruptcy filing or how much disposable income they have under a chapter 13 filing. There are

Certain bankruptcy exemptions apply to disabled veterans

a limited number of exceptions from the means test, and one group exempt from the test are certain disabled veterans.

Under the new law,  Disabled Veterans whose indebtedness occurred while they were  on active duty or performing a homeland defense activity are exempt from the means test.

A disabled veteran is defined by 38 U.S.C.A. § 3741 as “(A) a veteran who is entitled to compensation under laws administered by the Secretary for a disability rated at 30 percent or more, or (B) a veteran whose discharge or release from active duty was for a disability incurred or aggravated in line of duty.”

Active duty is defined by 10 U.S.C.A. § 101 as “full-time duty in the active military service of the United States. Such term includes full-time training duty, annual training duty, and attendance, while in the active military service, at a school designated as a service school by law or by the Secretary of the military department concerned. Such term does not include full-time National Guard duty.”

Homeland Defense Activity is defined by 32 U.S.C.A. § 901 as “an activity undertaken for the military protection of the territory or domestic population of the United States, or of infrastructure or other assets of the United States determined by the Secretary of Defense as being critical to national security, from a threat or aggression against the United States.”

This exception obviously applies to only a small percentage of consumers filing bankruptcy; but, for our soldiers injured in the line of duty and burdened by debt due to their service the exception can simplify the bankruptcy process for them.