Disabled Veteran - Questions / PLEASE HELP

[SJF75]

I've been lurking for a bit but this is my first post. Seems there is more knowledge here then with some Attorneys so maybe someone can help me. I cant seem to find an answer to these questions. I meet with an attorney yesterday but even he did not know.

We are in CA. My husband is a 100% disabled Veteran and yes about 90% of our debt was incurred while has active duty.

Here are my questions:
1- Is he exempt from taking the means test?
2-If yes does that mean that I still need to take it since we will file together?
2-Does his VA disability pay get entered into the schedule J? If it does...what is the purpose of skipping the means test?
3-Does that amount get backed out on either form?
4-If it does get entered and not backed out and its determined we need to file a Ch13 does the VA disability pay get accounted for when determining DMI

The "law" and or "rule" (not sure which it actually is) seems very grey???

Thank you in advance to anyone who can help me out!

[LadyInTheRed]

Welcome to bkforum!

You are right, the law isn't very clear on this. I don't have any experience with this issue, but I did a little research.

1. Since he is at least 30% disabled and incurred most debt while in active duty, he is exempt from the means test. I found that in several places, including http://www.nolo.com/legal-encycloped...eans-test.html

2. That answer wasn't as easy to find. According to this article by a bankruptcy attorney, you will have to complete the means test even if your husband is exempt. But, it sounds like you would include only your income.

2 again. You mean Schedule I. Nolo says it has to be included: https://www.nolo.com/legal-encyclope...-petition.html.
I also found a Florida case on this: http://pacer.flmb.uscourts.gov/pdf-new/37262859.pdf, That case does not set precedent in the 9th Circuit and I didn't find anything specific to the 9th Circuit. I do know that social security benefits are included on Schedule I even though not on the means test, so it would make sense that VA disability benefits would be too.

The reason the means test exemption can still help is that on the means test, you are limited to allowable expenses. On Schedule J, you can use actual expenses even if they are not allowed on the means test. This can make a significant difference for some people. Also, if the US Trustee objects to a Chapter 7 petition based on your disposable income on Schedule I/J, the decision on whether your filing is "an abuse" is more subjective than the means test presumption.

3. Not that I can find.

4. I think so.

Do keep in mind that California has asset exemptions for disability benefits. While that won't help for purposes of calculating disposable income, it does mean that if you keep the disability benefits separate from other funds, you can save the benefits received before you file and exempt them so that if you end up in a Chap 13, you have some cash to help you get through your plan. Confirm with your attorney that what I suggest will work.

You may want to try to find an attorney who specializes in representing veterans. Try contacting your county bar association or an organization like Swords to Plowshares for a referral.

[SJF75]

LadyInRed,
Thank you so much for getting back to me. It means allot that complete strangers are willing to take the time to research things just to help put my mind at ease.
The Attorney who I met with sent me an email late yesterday and this is all it said..
My research shows S**** (husband) is exempt from the means test entirely but you are not. However, with the 2 dependents you pass the means test for a chapter 7 case.
I have so many more questions...
He did not address the schedule I. By my calculations once we add his income back in on the schedule I - we still have disposable income on paper. My biggest concern is that we get to court and our case is dismissed then we still have a BK on our credit and a pile of bills. Right now we are current (robbing peter to pay paul) I would hate to start racking up a bunch of late payments during the BK process just to be dismissed. If you feel unsure isnt it easier to just file the 13?
When you say that his VA disability pay is protected....do you mean specifically any payments that he recieved prior to filling? So if we were to keep them seperated for the next six months; meannig have them deposited into another account where nothing else goes, does that mean that amount of money would not be counted as income over the last six months? That would make me feel more at east about filling a Ch 7. I doubt we could actually save that money because right now we are using it to keep afloat.
I know these are all questions for an Attorney but I cant seem to find any who have ever filed a case like ours....

[RetiredArmy]

My situation is similar to yours SJF75. I retired from the Army in 2007 after spending 23 years Infantry and retired here in Clarksville Tennessee. After paying $12,000 to a school to become a Railroad Freight Conductor and working in Nashville for a railroad company, I was laid off many times. The economy in 2007-11 was terrible and not being able to find a suitable source of employment was just too much on my family's finances. Make matters even worse, we had a VA Homeloan and began to fall behind on that too. Dave Ramsey couldn't even help us.....lol. I received a notice of foreclosure from the sheriff and went straight to a bankruptcy attorney.

My income increased when my VA Disability was increased to 100% Individual Unemployability (PTSD), Social Security Disability and converted my Retirement Check to CRSC (Combat Related Special Compensation). If you retired 20 years or more, you can now receive your full military pension and va disability, previously you could only get the larger of the 2. If you retired medically this rule does not apply. You need to go to human resources command for your branch of service Army, Navy, Airforce etc.. to get the paperwork. This allows your Retirement Check to become TAX FREE!

When my attorney completed our initial interview, I also explained that I felt that I did not have to include my disability income, military retirement, ssdi.. The Trustee differed......... as a matter of fact, my disposable income was off the charts because of the VA Disability and SSDI. This causes a dilemma between the Creditor, Debtor and Trustee. I even tried to keep this income off but big brother has a long reach and all of my income sources are on a computer somewhere.

So, long story short; if you have other sources of "EARNED INCOME" this will be added to your "UNEARNED INCOME" and will be up to the decision of the Trustee and Bankruptcy Judge. You can file a motion to have your case looked at because of your Veteran Status, but if you have a large amount of disposable income......

At the end of the whole thing, the Trustee had us paying back 100%, we get to keep our tax refunds and my VA Disability was the funding source for the Ch13.

Hope this helps. I am down to my last month on my journey.

[SJF75]

RetiredArmy Thanks so much for sharing that with me. I have since consulted with another attorney who said that we will need to file a Ch 13....regardless if he is exempt from the means test. Just like you mentioned...it doesn't matter that WE think it should be exempt what matters is the bottom line and what is left over each month. We are just waiting to find out if a 13 for us means a 100% plan or not. Either way we are anxious to get started.

One thing you mentioned...we did not know about. We had no idea his retirement should be tax free???? He is rated 100% Permanent & Total / Employable. So he is still able to work, but the jobs are limited because there is only so much his body will allow him to do. Right now he does get full pay of both but only the VA check is tax free. I will look into that for sure.

Thanks again for sharing...I have learned so much on here!!!

[RetiredArmy]

I even argued this case with the Trustee and my Attorney to the point that even the bankruptcy code states that VA disability is treated just like SSDI. It all depends on how the Trustee and Attorney will interpret the code in your jurisdiction. In my case the argument was that it could be interpreted that I was trying to game the system. I made these debts and have a moral obligation to repay these debts, but when I tried to work with ALL of the debtors they could care less about trying to negotiate acceptable repayment before I filed, so I in all honesty I did not want to pay 100% back to these people. The intent was not to ask for a handout but to get help. Well Fargo ended up paying me $5,000 for illegally foreclosing on my VA HOME LOAN and BB&T had to hand over the title after illegally repossessing my Chevy Malibu. So justice was served on the biggest offenders. Keep you head up and just plug along. We had plenty of money left over even after repaying the CH13 but it was difficult when our daughter had to go to college. The best part of that situation was that she was considered an "INDEPENDENT STUDENT" and received College Loans without us getting a Parent Plus Loan. Just get a copy of your CH13 paperwork and take it to the Financial Aid Office with a letter from the attorney and trustee stating that you are in a CH13 and not allowed to incur new debt. BE WARNED, when you fill out the PARENT PLUS LOAN you WILL BE APPROVED even though you are in CH13. Deny the loan based on the above information. Good Luck and Godbless Rakkasan!

[RetiredArmy]

RetiredArmy Thanks so much for sharing that with me. I have since consulted with another attorney who said that we will need to file a Ch 13....regardless if he is exempt from the means test. Just like you mentioned...it doesn't matter that WE think it should be exempt what matters is the bottom line and what is left over each month. We are just waiting to find out if a 13 for us means a 100% plan or not. Either way we are anxious to get started.

One thing you mentioned...we did not know about. We had no idea his retirement should be tax free???? He is rated 100% Permanent & Total / Employable. So he is still able to work, but the jobs are limited because there is only so much his body will allow him to do. Right now he does get full pay of both but only the VA check is tax free. I will look into that for sure.

Thanks again for sharing...I have learned so much on here!!!

Go to the DFAS website for more information. https://www.dfas.mil/retiredmilitary...lity/crsc.html

The form to use is: DD Form 2860 Google it then fill out. Send a copy of your full VA Disability Rating with the application (don't worry about the codes) and mail into the address on the form. Within 60 days you will be getting a letter in the mail. Just a quick note, SBP, Tricare, Delta Dental and any allotments will have to be paid by you with your checking account. Hope this helps!

[SJF75]

RetiredArmy you really have been a huge wealth of knowledge.

My son (17) will be heading to college next year and filling a C-13 was a big concern for me because of that. The attorney just looked at me and said "I don't see why he would have any problems". He never mentioned being able to apply for loans on his own. I guess its not their job to know everything and that is why I am so thankful for this forum!! I am hoping that between the CalVet, transferring of the Post 9/11 GI Bill and his CH35 benefit neither he or we should have to take out any loans but its still very good information to have.

We are still waiting (anxiously) for our attorney to run the numbers and let us know what a 13 payment will look like for us. I will keep you posted.
Thanks again!

[justbroke]

I even argued this case with the Trustee and my Attorney to the point that even the bankruptcy code states that VA disability is treated just like SSDI.

When it comes to calculating current monthly income (CMI), the bankruptcy code (unfortunately) does not treat them the same as "income" is defined. What typically happens is that the servicemember has a better argument that the code allows a certain VA disability level to bypass the means test altogether. If that fails, then the next argument is special circumstances. The argument is lost on whether any income from VA disability benefits are to be included in CMI on the means test.

I applaud you for standing up for your rights as a servicemember and for serving. I would also argue, along your side, that the bankruptcy code "should" be more accommodating to our warriors, let alone our (service-connected) wounded warriors! (Yes, there are some things in the Servicemembers Civil Relief Act (SCRA), but nothing specifically in the bankruptcy code other than references to the SCRA.) This causes servicemembers to argue under their case under special circumstances

Personally, I believe it's a gap in the bankruptcy code which Congress "could" have corrected when they amended some of the SCRA a few years ago. They simply chose not to add the sentence, that was in the draft version, that would have excluded this service-related disability income from means testing altogether (and as income). I believe this failure to be a tragedy, if you ask.

The form to use is: DD Form 2860 Google it then fill out. Send a copy of your full VA Disability Rating with the application (don't worry about the codes) and mail into the address on the form. Within 60 days you will be getting a letter in the mail. Just a quick note, SBP, Tricare, Delta Dental and any allotments will have to be paid by you with your checking account. Hope this helps!

Pretty cool. Thanks for the information. I'm sure others will benefit from this way to deal with financial aid while in Chapter 13.

Hoo-aah

[RetiredArmy]

RetiredArmy you really have been a huge wealth of knowledge.

My son (17) will be heading to college next year and filling a C-13 was a big concern for me because of that. The attorney just looked at me and said "I don't see why he would have any problems". He never mentioned being able to apply for loans on his own. I guess its not their job to know everything and that is why I am so thankful for this forum!! I am hoping that between the CalVet, transferring of the Post 9/11 GI Bill and his CH35 benefit neither he or we should have to take out any loans but its still very good information to have.

We are still waiting (anxiously) for our attorney to run the numbers and let us know what a 13 payment will look like for us. I will keep you posted.
Thanks again!

Glad that you are on your way. The CH13 actually helped me get my bad spending habits under-control. It will all work out and soon you will be on your way to a debt free life. The holidays have become more of a one big gift for the kid and a nice dinner before evening Mass. Too many times, we tend to over compensate by buying materialistic things to make up for the lost time. But vacations and weekends with the wife are just as important too!

[Lavish]

Real bummer that the last 2 years of threads about VA disability and bankruptcy are now gone. I hope they can be recovered!