What Does it Mean That Veteran Benefits Are Bankruptcy-Exempt?
Bankruptcy is a legal process by which you can eliminate your debts or repay them at lower interest rates. Individuals and companies are allowed to file for bankruptcy. Chapter 7 and Chapter 13 are the two types of bankruptcy available for individual filing. In a Chapter 7 filing, your assets and property are sold. However, exemption laws can protect certain assets that are necessary for supporting a family. For this reason, veteran benefits are bankruptcy-exempt.
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Chapter 7 Bankruptcy and Systems of Exemption
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Chapter 7 is a type of bankruptcy in which the court eliminates your debts through selling part of your assets and property. With the money collected, the court pays your creditors. Generally, secured debts are paid first. After this, you receive the discharge for your debts, and you no longer owe the debts included in the discharge. However, the Bankruptcy Code, the set of rules and regulations for bankruptcy cases, gives states the right to protect some assets and property that you need for the support of your family. States have, therefore, laws that protect some assets from being sold, and these laws are called systems of exemption.
Chapter 7 and Veteran Benefits
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Veteran benefits are received through the Department of Veterans' Affairs. These benefits can be in the form of cash, education and training. Veteran benefits are bankruptcy-exempt. This means that, if you receive veteran benefits and you are filing for Chapter 7, you can claim your veteran benefits as an exemption under your state laws. If you do so, the court cannot touch your benefits to pay your creditors, and you can keep them to help support your family.
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Claiming Veteran Benefits as an Exemption
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If you receive veteran benefits and you are filing for Chapter 7, you should claim your benefits as an exemption. To do so, you must include in your petition a description of your benefits, the amount of benefits and the law under which you are making the exemption. You need to verify your state exemptions to know the law under which you can claim your benefits as exempt. Visit your state's bankruptcy court website to find a list of the exemptions you can claim.
Other Exemptions
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Veteran benefits are not the only exemptions you can claim. You can also claim your house, food and clothing. Many states also include a vehicle and other benefits you receive that help you to support your family, such as Social Security benefits, life insurance, pensions and health insurance. The value of exemption and the assets and property that you can claim vary according to each state's laws and regulations.
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