Veteran’s Benefits or VA Benefits, cannot be garnished, seized or levied by general creditors, whether at source or once received by the Veteran.
Because the code section in question 38USC§5301, specifically states that VA Benefits:
“shall be exempt from the claim of creditors”
There are limited exceptions for spousal, child and family support payments that you may owe as a matter of divorce but those are the subject of a different article, not this one.
So guess what? That means that Visa, Mastercard, medical bills, collection agencies, collection attorneys and payday loans, among others, cannot collect from your VA Benefits.
Likewise, if you were to file a bankruptcy, then because a Bankruptcy Trustee steps into the shoes of the creditors then the bankruptcy trustee assigned to administer your case does not have a better claim than the creditors for whom he is collecting, the bankruptcy trustee has only the same rights as the creditors, not better.
Therefore VA Benefits cannot be used by a bankruptcy trustee to pay your creditors either. This is true whether your VA Benefits have already been deposited into your bank account or not. Creditors cannot take your VA Benefits and Bankruptcy Trustees cannot take your VA Benefits.
According to the Bankruptcy Code, the chapter 7 qualification test, also called the Means Test cannot include Social Security as part of the analysis. However, VA Benefits are not excluded by the Bankruptcy Code from the Means Test.
It makes the two codes contradict each other. The VA benefits if calculated into the Means Test cause you to fail the means test, then the bankrupt person, or person who filed the bankruptcy, should sign an affidavit under penalty of perjury stating that the bankrupt person does not want to pay those veterans benefits into a monthly consolidation plan or chapter 13 plan. This will solve the problem.
The chapter 7 Means Test or qualification test determines if you make too much money to file a chapter 7 bankruptcy, and if you do make too much, then the United States Trustee’s Office invites you to file a consolidation plan type bankruptcy called a chapter 13 bankruptcy. But if you don’t want to pay your Veteran’s Benefits into the consolidation plan, you only have to say so. They cannot make you pay your VA Benefits into a chapter 13 bankruptcy payment plan.
So, in practical terms therefore, VA Benefits are not going to affect your eligibility to file a chapter 7 bankruptcy.
However, as stated above, your ex-wife, ex-husband, ex-spouse or children may be able to, but that’s a much more involved article than I’m writing today. I don’t do any divorce work, so if that is a question you need answered, then I recommend you find a competent attorney familiar with divorce / family law and who is also familiar with veteran’s benefits in your area.