The Unequal Treatment of Veterans and Veterans' Disability Benefits under the Bankruptcy Code

Introduction

Consider two hypothetical Chapter 13 cases. The two debtors own exactly the same assets, owe identical amounts to their creditors, and earn identical monthly wages. Each debtor receives monthly disability benefits from the Federal government in identical amounts, the only difference being that one debtor receives those benefits from the Social Security Administration and the other debtor receives benefits from the U.S. Department of Veterans Affairs. Each debtor excludes disability benefits from the calculation of disposable income. The debtors propose identical Chapter 13 plans, each paying unsecured creditors less than 100% of claims. The Chapter 13 trustee objects to confirmation: by excluding disability benefits, the debtors fail to commit all projected disposable income to funding their plans as required by § 1325(b) of the Bankruptcy Code.

The full article was published in the June 2017 issue of Norton Bankruptcy Law Adviser.