Personal bankruptcy is hard for disabled veterans

Disability benefits play an important role in many people’s finances, helping them to stay afloat even when they might be struggling with money and bills. In most cases, filing for personal bankruptcy will not affect a person’s ability to continue receiving disability benefits. For Connecticut veterans this is not always the case.

Disability benefits — including Social Security Disability benefits — are not taxable, and under current bankruptcy laws this means they are not considered to be disposable income. This means that not only do they not count towards a person’s general income, but they also cannot be seized for repaying debt collectors. This exemption does not apply to veterans disability benefits.

Currently, when a disabled veteran files for bankruptcy, his or her veterans disability benefits are counted as disposable income even though they are not otherwise taxed. Sens. Tammy Baldwin and John Cornyn recently introduced a bill called the Honoring American Veterans in Extreme Need Act, which would correct what they see as a glaring oversight. If passed into law, it would allow veterans disability benefits to be considered exempt from disposable income.

When a person receiving disability benefits files for personal bankruptcy, that individual generally still relies on those benefits as a steady source of financial stability. When veterans in Connecticut are faced with overwhelming debt, they may feel as if bankruptcy is off the table for them. This can be a difficult situation to be in, but speaking with an attorney who is experienced in bankruptcy law might be able to better explain an individual’s options.