By Pranava Moody
The Honoring American Veterans in Extreme Need (HAVEN) Act amended the Bankruptcy Code to exclude certain military-related disability and death benefits from the definition of “current monthly income” (CMI). 11 U.S.C.A. § 101(10A). By removing these earned, needs-based benefits from the means test calculus, the Act aligns treatment of military disability compensation with Social Security benefits. 165 Cong. Rec. H7215-01, 2019 WL 3307644 (July 23, 2019) (statement of Rep. McBath). The purpose is straightforward: to ensure that veterans and their families are not penalized in bankruptcy for receiving compensation tied to service-connected injury, illness, or loss.
The exclusion has practical consequences for eligibility and case posture, particularly in Chapter 7. Because CMI drives the means test, excluding qualifying military benefits can be outcome-determinative in close cases. See https://www.justice.gov/ust/means-testing. A veteran whose countable income would otherwise tip above the presumption-of-abuse threshold may qualify for Chapter 7 when service-connected disability compensation is properly excluded. See https://www.uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics. Even in Chapter 13, removing those benefits from CMI informs plan feasibility and projected disposable income analysis, supporting more realistic budgets and plan terms. See In re Gresham, 616 B.R. 505 (Bankr. E.D. Mich. 2020). Practitioners should identify all military-derived payments, distinguish covered disability and death benefits from noncovered income, and document the exclusions in the means test forms and supporting schedules.
Beyond bankruptcy, veterans and servicemembers enjoy special rights in debt collection and consumer credit contexts. Protections governing interest rate relief, stays of certain proceedings, default judgments, repossessions, and foreclosure timelines are designed to account for the unique demands of military service and the potential impacts of deployment or medical recovery on a borrower’s ability to respond. See Servicemembers Civil Relief Act (SCRA). Counsel should verify military status early, screen for covered periods of service, and demand creditor compliance with notice, verification, and rate-adjustment requirements. Inside bankruptcy, these protections intersect with the automatic stay and discharge injunction, underscoring the need to coordinate remedies and ensure creditors do not leverage noncovered obligations to pressure payment from protected benefits.
Security clearance considerations loom large for military clients facing financial distress. Unresolved delinquencies, unfiled taxes, and garnishments can raise suitability concerns, while proactive engagement, credible repayment plans, and utilization of lawful protections can mitigate risk. See https://law.yale.edu/student-life/career-development/students/career-pathways/public-interest/you-apply-understanding-government-background-checks. Attorneys should counsel clients to disclose financial issues accurately, avoid preferential or undisclosed transfers, and maintain documentation showing good-faith efforts to stabilize finances. Where feasible, selecting a chapter and case strategy that quickly halts garnishments, clarifies obligations, and preserves essential income may support clearance adjudications focused on reliability and judgment.
Practical guidance for debtor’s counsel includes: identifying all military benefits at intake; segregating excluded disability or death benefits for CMI; confirming documentation sources; aligning budgets with non-excluded income; and evaluating venue and timing with sensitivity to duty status and medical treatment. For creditor’s counsel, implement screening procedures for military status, train staff on protected benefit handling, and calibrate litigation strategy to avoid reliance on funds that cannot lawfully be counted or collected. In all cases, maintain clear communication, honor cease-contact requirements where applicable, and tailor settlements that respect protected income streams.
About the author
Pranava Moody is a litigation attorney at Lewis Brisbois Bisgaard & Smith LLP, defending healthcare providers, clinics, and medical practitioners in complex medical malpractice litigation. She is an Air Force Veteran and is admitted to practice in Nevada and New Mexico.
About the article
This article was originally published in the Communiqué (Feb. 2026), the official publication of the Clark County Bar Association.
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