When debt becomes overwhelming and there are insufficient funds to make the payments, bankruptcy can provide respite. Individuals who file for bankruptcy are shielded from creditors, collection efforts, and repossession, while their debts are discharged. Veterans are eligible for numerous additional bankruptcy protections that the average debtor cannot obtain. Veterans are afforded the same exemptions and may be eligible for additional exemptions under bankruptcy law.
Real Estate Exemptions
In a number of states, the bankruptcy code exempts the filer's primary residence from liquidation. Personal property valued at up to $30,000 for an individual and $60,000 for a family is exempt from liquidation or repossession during bankruptcy. If the debtor is unable to pay his or her debts because of active military service, bankruptcy laws safeguard the homestead and personal property from seizure and liquidation.
Prior to and after the receipt of veteran's benefits, bankruptcy laws defend them from seizure. The additional protection of their group insurance and survivor benefits is provided to veterans. Wages and savings of active military members are also exempt from garnishment during bankruptcy. However, veteran's benefits do not qualify for this exemption if they are seized to satisfy child support obligations.
Credit Counseling Obligation
Before a person's bankruptcy case can be discharged and their debts eliminated, the new bankruptcy laws mandate that they complete a credit counseling course. One exception is for filers who are """"incapable, disabled, or on active military duty. If the bankruptcy petitioner can demonstrate impairment due to mental illness or disability, the court may waive the credit counseling course requirement. The bankruptcy code may also exempt a veteran from the credit counseling requirement if he or she is on active duty at the time of filing.
Means Test Requirement
In order to qualify for bankruptcy, individuals must pass a means test, which determines their financial standing. The means test examines the monthly income-to-debt ratio in order to determine whether debt relief is required due to financial hardship. Some individuals may petition for Chapter 7 bankruptcy, but their case may be converted to a Chapter 13 repayment plan if they fail the means test. The bankruptcy code prohibits dismissal or conversion of a case based on means testing for anyone who is (a) a disabled veteran and (b) acquired the debt during active duty. When these two conditions are met, a veteran's Chapter 7 bankruptcy case cannot be dismissed or converted to a Chapter 13 bankruptcy repayment plan; it must remain a Chapter 7 bankruptcy debt elimination case.""
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