Written by Attorney Whitney G. Coats
An individual who files bankruptcy is only allowed to have up to a certain dollar amount in their possession on the date of filing of their bankruptcy petition. All money in a filer’s possession must be reported, regardless of whether the funds are located in or outside of a bank account. The allowed amounts recently increased with the amendment of Arizona Revised Statute § 33-1126(A)(9) from $150.00 to $300.00 in one bank account for each filer and from $300.00 to $600.00 in one bank account for married couple filers.
There are some exceptions to the rule that a filer only have a certain amount of money in one bank account on the date of filing and one of those exceptions include an individual’s Veteran’s Disability Benefits. Pursuant to 38 USC Sec. 5301(a)(1), payments of benefits due or to become due, and payments made to, or on account of, a beneficiary shall be exempt from taxation, shall be exempt from the claim of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process. This means an individual’s Veterans Disability Benefits are one-hundred percent (100%) protected if that individual files bankruptcy, regardless of whether the individual has received or will be receiving the benefits after the bankruptcy has been filed. There is no dollar limit for the amount of Veterans Disability Benefits a filer may have in a bank account on the date of filing. For example, if a filer received a back payment of Veterans Disability Benefits in the lump sum amount of $30,000.00 prior to filing bankruptcy, these funds will be protected and cannot be touched by the bankruptcy trustee before, during or subsequent to the bankruptcy under 38 USC Sec. 5301(a)(1).
For example, Bob is a veteran who previously filed a claim that is now on appeal with the Department of Veterans Affairs. Bob is barely making ends meet and is considering filing bankruptcy because he no longer can afford to pay his credit card and medical debts, and continue to pay his mortgage payment. Bob wages are currently being garnished and he’s concerned that he’s going to lose his home because he’s now two mortgage payments behind. Bob is also set to receive an arrearage payment from his Veterans Disability Benefits appeal in the amount of $8,500.00 in the next few months. Bob does not want to lose this money if he files bankruptcy but needs to stop the wage garnishment and needs to pay his mortgage because the bank is going to foreclose on his home. Concerned, Bob meets with a knowledgeable bankruptcy attorney to see what his options may be. Fortunately, the attorney lets Bob know that bankruptcy will be a good option, that will stop the wage garnishment, allow him to keep the $8,500 arrearage he’ll receive in arrearage Veteran’s Disability Benefits from his appeal and pay the arrearage on his mortgage so he can keep his home.
Also, it’s important to know that while there is no cap amount of Veterans Disability Benefits a Debtor may have in one bank account on their file date, these funds in most circumstances, cannot be commingled with non-exempt funds. This ensures no issues will arise in a filer’s bankruptcy proceeding with their appointed bankruptcy trustee. An example of non-exempt income includes but is not limited to: a filer’s employment income, pension income, income tax refunds, contributions from friends or family members and others source of funds.
Laws do not protect all kinds of benefits when an individual files bankruptcy; Veterans Disability Benefits are an exception. Therefore, is very important to speak with a knowledge attorney who can guide you on what benefits and assets may or may not be protected when you file bankruptcy. Too many times I’ve seen individuals file without an attorney and run into troubles that easily could have been prevented had the person enlisted a knowledgeable and qualified attorney to assist with their bankruptcy matter. Contact Attorney Whitney G. Coats, Esq. at Dana Law Firm today, who will guide you through the bankruptcy laws and process and ensure you’re maximizing and retaining all possible assets.
Whitney G. Coats, J.D., Of Counsel, is a bankruptcy attorney who works with the Dana Law Firm in its’ Consumer Bankruptcy Department in Scottsdale, Arizona.