Means Test Exceptions for Military Personnel in Chapter 7 Filings
by Luke Homen
If you’re active duty military or a veteran dealing with debt, you might be eligible for special protections that can make filing Chapter 7 bankruptcy easier. The means test is usually the biggest hurdle in a Chapter 7 case. It determines whether your income is low enough to qualify. But military service members get important exceptions that most people don’t have access to.
When you call our law firm at 405.296.0072 to speak to our Oklahoma bankruptcy lawyers, we’ll explain how the HAVEN Act and other military exemptions work, see if you qualify, and go over what documentation you’ll need. If you’ve served your country and are now facing financial hardship, these protections could be the difference between qualifying for debt relief or getting stuck in a payment plan you can’t afford.
What the Means Test Does
The means test compares your income to your state’s median income. If you earn too much, you typically can’t file Chapter 7 and must use Chapter 13 instead, which requires a 3-5 year repayment plan. For military families already stretched thin, that distinction matters.
The test looks at your average monthly income over the six months before you file. It includes your base pay, housing allowances, special pay, and most other compensation. For service members with variable deployments or recent pay changes, this calculation can be tricky.
The HAVEN Act: Your Most Important Protection
The HAVEN Act became law in 2019 and changed everything for military filers. This law excludes certain types of military income from the means test calculation. Here’s what gets excluded:
- Disability payments – Any disability compensation from the VA doesn’t count toward your income. This includes monthly disability payments and special compensation for dependents.
- Hazardous duty pay – Combat zone pay, hostile fire pay, and imminent danger pay are all excluded. If you earned it in a dangerous location, it doesn’t count against you.
The HAVEN Act applies to both active duty personnel and veterans. As long as you received these types of payments during the six-month lookback period, they come out of your means test income. For many service members, removing disability pay alone can reduce their calculated income below the median, helping them qualify for Chapter 7.
Who Qualifies as Military for Bankruptcy Purposes
You don’t have to be currently serving to use these exemptions. The law covers:
- Active duty members of any military branch
- Reserve and National Guard members on active duty orders
- Veterans who received qualifying income during the lookback period
- Service members who’ve recently separated but filed within the right timeframe
The key is whether you received excluded income during the six months before filing. A veteran who gets VA disability payments qualifies just as much as someone currently deployed.
The Disabled Veteran Exemption
There’s another powerful exemption specifically for disabled veterans. If you’re a disabled veteran and you incurred your debt primarily during active duty or while performing homeland defense activity, you can skip the means test entirely.
This exemption has three requirements.
- Disability Rating: First, you need a disability rating from the VA or the Department of Defense. The rating percentage doesn’t matter, and even 10% counts the same as 100%.
- When Debt Occurred: Second, at least half of your total debt must have been incurred while you were on active duty or serving in a homeland defense role.
- Documentation: Third, you need documentation proving both the disability and when you took on the debt.
When this exemption applies, you bypass the means test completely. You don’t need to calculate income, compare to medians, or worry about the six-month lookback. You move straight to proving you qualify for discharge based on your overall financial situation.
Other Military-Friendly Bankruptcy Rules
Beyond the means test, service members get additional protections. The Servicemembers Civil Relief Act (SCRA) can pause or slow down bankruptcy proceedings if you’re deployed. Courts must postpone hearings if your military duties prevent you from attending.
Military retirement pay gets special treatment, too. While it counts as income for the means test (unless covered by HAVEN Act exclusions), many states protect a portion of military retirement from creditors. The exact amount varies by state, so ask an Oklahoma bankruptcy attorney about your specific protections.
What Documentation You’ll Need
To claim these exemptions, gather your records now:
- LES (Leave and Earnings Statements) for the past six months
- VA award letters showing disability ratings and payment amounts
- Orders showing deployment dates and combat zone service
- DD-214 or other discharge paperwork
- Debt statements with origination dates
Our bankruptcy attorneys will use these documents to prove which income should be excluded and whether you qualify for the disabled veteran exemption. Missing paperwork can delay your case or cost you valuable exemptions.
Talk to an Oklahoma Bankruptcy Attorney Today!
Don’t try to navigate these rules alone. Military exemptions are complex, and mistakes on your means test can get your case dismissed. A bankruptcy lawyer at Convenient Bankruptcy understands military benefits, can identify every exclusion you’re entitled to, and structure your filing for the best outcome.
You served your country. These protections exist because lawmakers recognized that military service comes with unique financial challenges. Use them.
Call Convenient Bankruptcy at 405.296.0072 for a consultation or fill out our confidential contact form to learn more about how bankruptcy might work for you.
Attorney Luke Homen is the President of Convenient Bankruptcy. He places great value on helping individuals and families solve their financial challenges and achieve real financial freedom. His goal is to find a customized solution that fits each client’s unique situation. Luke has been practicing law since 2008, and was voted “Best Bankruptcy Attorney in Oklahoma” by The Oklahoman in the Reader’s Choice Awards.
