Chapter 7 vs Chapter 13 for Veterans (2026)

Veteran Bankruptcy Protections

Veterans receive several special protections in bankruptcy law, particularly related to disability benefits and the means test. If you served in the military, these provisions can significantly affect which chapter is right for you.

VA Disability and the Means Test

Under the 2020 amendment to the Bankruptcy Code, VA disability benefits are excluded from the means test calculation for disabled veterans. This means veterans receiving VA disability compensation can qualify for Chapter 7 regardless of the amount received.

Additionally, veterans with disabilities rated at 30% or more who incurred debts primarily during active duty or homeland defense activity are completely exempt from the means test. This is one of the broadest means test exemptions in the Code.

VA Benefits Protection in Bankruptcy

VA disability payments, VA pension benefits, and certain other VA benefits are protected from creditors under both federal and state law. In bankruptcy, these funds cannot be taken by the trustee or creditors as long as they are kept in a separate, identifiable account.

However, once VA benefits are commingled with other funds in a general bank account, tracing and protecting them becomes more difficult. Best practice: maintain a separate account for VA payments.

Military-Specific Debts

Military members and veterans may have unique debts: DFAS overpayment recoupments, GI Bill overpayments, government travel card balances, or debts to military credit unions like USAA, Navy Federal, or PenFed.

Most of these debts are dischargeable in bankruptcy. Government overpayments (DFAS, VA) can be discharged unless obtained through fraud. Military credit union debts are treated the same as any other unsecured debt.

Which Chapter for Veterans?

Most veterans benefit from Chapter 7 due to the generous means test exclusions for disability benefits. Chapter 13 may be appropriate if you need to cure mortgage arrears (VA loans included) or have significant non-exempt assets.

Free legal aid is available to veterans through legal aid organizations, VA programs, and pro bono attorney networks. Ask your local VA office or visit lawhelp.org for resources.

Frequently Asked Questions

Are VA disability benefits protected in bankruptcy?

Yes. VA disability payments are protected from creditors and the bankruptcy trustee under federal law. They are also excluded from the means test calculation, making Chapter 7 qualification easier.

Can disabled veterans skip the means test?

Veterans with 30%+ disability ratings who incurred debts primarily during active duty or homeland defense activity are exempt from the means test entirely. Other veterans can still exclude VA disability from the calculation.

Is there free legal help for veterans filing bankruptcy?

Yes. Many legal aid organizations prioritize veterans. Contact your local VA office, visit lawhelp.org, or check with your state bar association's veteran legal services program.

Can I discharge military debts in bankruptcy?

Most military debts are dischargeable, including DFAS overpayments, government travel card balances, and military credit union debts. Government debts obtained through fraud are not dischargeable.

Chapter 7 vs Chapter 13for Veterans