Expert: Terry Leeders - 7/24/2008

Question
QUESTION: I am a 80% disabled veteran who has become a victim of the mortgage crisis.  As my mortgage payment has now doubled, I have consulted an attorney in an effort to file for bankruptcy relief.  Almost all of my debts, home included were accrued during active duty.  I have a good income, but not nearly enough to cover the mortgage, credit debt and vehicles.  Am I entitled to a Chapter 7 filing, or because of my income, am I forced to file a Chapter 13?

ANSWER: Income is a pivotal component to determine what chapter a debtor is eligible for.  With chapter 7, you can have to break even each month, on your monthly necessities.  Also, you have to pass the 6 months budget test called the Means Test, where your income is compared to the IRS household income standards for your household size.  If you pass the test, meaning you do not have any disposable monthly income, and you do not have any unexempt assets, then chapter 7 would be available to you.  Your attorney has examined your situation, so I would follow their advice.

---------- FOLLOW-UP ----------

QUESTION: I have done some research and found countless references stating that certain disabled veterans are not required perform any means testing.  I am supplying one such reference for your perusal.  Based on this, it seems clear, that a Chapter 7 could be filed with little or no objections.

Answer
The means test is not applicable if you are a disabled veteran with debts incurred primarily during active duty or homeland defense.
Then the court will just look to monthly income and expenses to see if you qualify otherwise for chapter 7 vs Chapter 13.