How Florida Veterans Can Use Bankruptcy To Reclaim Financial Freedom

Veterans often face unique financial challenges after military service, especially when dealing with health issues, limited benefits, or employment transitions. Fortunately, U.S. bankruptcy law offers critical protections for veterans, particularly those receiving disability income. In this article, we’ll discuss…

• Whether VA benefits are excluded from income calculations for bankruptcy purposes.
• Whether filing for bankruptcy will impact future VA loans.
• If bankruptcy can stop foreclosure on your VA-backed home loan.

Can VA Disability Income Be Excluded From The Means Test In A Bankruptcy Case?

Yes, VA disability income can be excluded from the means test in a Florida bankruptcy case. This change was enacted around 2017 during the previous administration, and it’s made a significant difference. Before that, I often had to turn veterans away from Chapter 7, even those with modest incomes, because their VA disability checks were counted as part of their total income. That disqualified many from the quicker, more straightforward Chapter 7 process.

Now, VA disability payments don’t count toward the means test calculation. That exclusion allows more veterans to qualify for Chapter 7, even if they’re still trying to work and supplement their income. It’s been one of the most meaningful changes in bankruptcy law in recent years for veterans.

Are Veterans’ Benefits And Military Pensions Protected Under Chapter 7 Or Chapter 13 Bankruptcy?

Yes, veterans’ benefits are generally protected. Military pensions are also typically protected, especially when they come as monthly payments. In most cases I’ve handled, pension amounts are modest and don’t raise red flags. However, if a veteran had a large lump sum from a pension sitting in a separate account, I’d need to look at how it’s classified, whether IRA, qualified pension, or another way, to determine whether it’s exempt.

That said, we don’t tend to see many veterans with large pension accounts, unfortunately. As a country, we haven’t always taken care of our veterans financially as well as we should.

Alec Solomita, founder of Solomita Law, PLLC, has proudly helped Florida veterans regain control of their finances through bankruptcy, including many who depend on VA disability benefits.

With deep respect for those who served, Alec Solomita understands the unique legal rights and protections available to veterans, especially when navigating complex income types like CRSC or military pensions. He’s successfully guided veterans through Chapter 7 and Chapter 13, even in cases involving foreclosure or loan eligibility questions.

If you're a veteran facing financial stress, reach out to Solomita Law, PLLC today and take the first step toward lasting peace of mind.

Will Filing For Bankruptcy Affect My Future Eligibility For VA Loans?

Yes, but only temporarily. If you file for bankruptcy and later want to apply for a VA-backed mortgage, you’ll typically need to wait at least one year after your case is closed before becoming eligible again. Aside from that waiting period, filing for bankruptcy doesn’t permanently affect your eligibility for a VA loan. Once the waiting period is over and your finances have stabilized, you can apply just like anyone else.

Can Bankruptcy Stop A Foreclosure On A VA-Backed Home Loan?

Yes, bankruptcy can stop a foreclosure on any type of home loan, including a VA-backed loan. Whether the property is your primary residence or not, filing for bankruptcy automatically triggers a stay, which halts foreclosure proceedings. While this protection may only be temporary in some situations, in most cases involving a homestead property, it provides enough time to work out a long-term solution, either through Chapter 13 repayment or debt discharge in Chapter 7.

What Happens If I Receive Combat-Related Special Compensation (CRSC)?

In general, only VA disability income is excluded from the means test. Other types of military compensation, such as CRSC or VA pensions, may still be counted as income unless there’s a legal exemption I can identify. If you receive CRSC, we’d need to review the nature of the compensation and the statutes that apply. If there’s no explicit exemption, it would likely be treated as regular income in the bankruptcy calculation.

What Benefits Or Protections Do Veterans Have In Bankruptcy That They May Not Even Be Aware Of?

The biggest protection most veterans don’t realize they have is the exemption for VA disability income. Many assume it will count against them in the means test, but it doesn’t. This can make or break a Chapter 7 case.

Aside from that, there are no broad, special protections in bankruptcy law that apply to all veterans. However, there is a very specific rule that can offer relief to veterans who were injured in combat. If their current financial hardship stems directly from a service-related injury, and that can be proven, it might allow more flexibility in bankruptcy eligibility, particularly when income is otherwise too high to qualify. That law is narrowly written, though, and I haven’t personally had a case where it applied.

Still Have Questions? Ready To Get Started?

For more information on veteran bankruptcy help in Florida, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (407) 708-9681 today.