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Veterans Exemptions and Bankruptcy in New Jersey & New York

Recent studies have suggested that many veterans who were injured are living below the poverty line in New York and New Jersey. If you are a veteran, you may be wondering about the different bankruptcy laws that apply to you. Federal bankruptcy law gives veterans certain benefits

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Veteran filing bankruptcy

 if they have to file bankruptcy. Some of these benefits are for active duty members and compensation for disabled veterans injured in the line of duty. Prior to 2019, veterans benefits had to be relinqushed to the bankruptcy court. In 2019, the federal laws changed to allow protections to veterans’ benefits from creditors. This law is known as the HAVEN ACT which allows stronger protections to veterans’ filing bankruptcy. 

Types of Bankruptcy for Veterans’

The Bankruptcy Code allows individuals who are financially distressed, a fresh start. Bankruptcy law allows individuals a way to eliminate their debt and start over. When a debtor gets a discharged, their obligation to pay their debts is eliminated. The Bankruptcy Court has rules to determine who can file for bankruptcy and get their debts eliminated. The Bankruptcy Court wants individuals who file bankruptcy, to only be allowed to eliminate their debt if they truly can’t afford to pay it back. Thus, the bankruptcy code creates different chapters for veterans’ who want to file bankruptcy in New York and New Jersey. The two chapters that consumers can file are Chapter 7 bankruptcy and chapter 13 bankruptcy.

Chapter 7 bankruptcy

This is also known as a liquidation of assets. In this chapter of bankruptcy, a debtor files a bankruptcy petition and their property becomes part of the bankruptcy estate. When a debtor files this chapter they get a discharge and their debt is eliminated. To qualify for a Chapter 7 bankruptcy, individuals must pass a means test. The Means Test determines who qualifies for bankruptcy based on their disposable income. To qualify under the means test, your income must be below the median income for a family of similar size in New York or New Jersey.

Chapter 13 bankruptcy

If you don’t qualify for a Chapter 7 bankruptcy, then you will have to file a chapter 13 bankruptcy. In a chapter 13 bankruptcy, individuals can restructure their debt and enter into a 3-5 year repayment plan.

Veterans’ Benefits in Chapter 7 Bankruptcy in New York and New Jersey

Typically, when individuals file bankruptcy in New Jersey and New York, they must include all sources of income to determine if they qualify under the Means Test. Some types of income may be excluded like social security. Veterans’ benefits are not counted as income on the means test.

Disabled veterans and Veterans who are in active duty can be exempt from the means test in New York and New Jersey.

If you are a disabled veteran, you may be able to file a chapter 7 bankruptcy in New Jersey or New York, without filling out the Means Test. To qualify for the exemption, the Bankruptcy Code requires that (1) the veteran is disabled and (2) the debt was incurred while on active duty or performing a homeland defense activity. To be considered a diabled veteran the Bankruptcy Code requires that the Veterans administration, gave the individual a rating of atleast 30% disabled and the military discharge due to a disability was in the line of duty.

How the Bankruptcy Court Treats Active Duty Military and Navy individuals in New Jersey and New York

If you are currently in active duty, you may be wondering about New York and New Jersey bankruptcy exemptions that apply to you. The Bankruptcy code, allows individuals who were or are still active for a period of 90 days, in the Armed forced or the National Guard after September 11, 2001 to be exempt from the means test. To qualify under this exemption, you must file your New York or New Jersey bankruptcy case either (1) During your term of duty or (2) within 540 days after it ends.

These requirements can seem a little confusing and if you are a disabled veteran and wondering if you qualify for a New Jersey means Test Exemption or New York Means Test exemption, you should speak with a New Jersey bankruptcy lawyer or a New York bankruptcy lawyer, to help you navigate these laws. Karra L. Kingston Esq. helps veterans and individuals file bankruptcy and start over. Karra serves Staten Island, New York and New Jersey. If you have questions about whether you may be exempt from the means test, our lawyers can help.