CHAPTER 3, D. HAVEN Act's Amendment to CMI

• Jurisdiction: United States

D. HAVEN Act's Amendment to CMI

Broadly Protecting Military Service-Related Disability and Death Benefits in Bankruptcy¹

ABI Journal

November 2019

Jessica Hopton Youngberg

Veterans Legal Services

Boston

On Aug. 23, 2019, the Honoring American Veterans in Extreme Need Act of 2019 (HAVEN Act) was signed into law by President Donald Trump and immediately became effective to help servicemembers and veterans, among others.² The HAVEN Act amended § 101(10A) of the Bankruptcy Code — defining "current monthly income" (CMI) — by entirely striking and replacing subparagraph (B). The new subparagraph (B) contains the prior's text, expressing what CMI "includes" and "excludes," and divides that text into clauses and subclauses.³ Most importantly, new subparagraph (B) adds a fourth category of income that is now excluded from CMI:

any monthly compensation, pension, pay, annuity, or allowance paid under title 10, 37, or 38 in connection with a disability, combat-related injury or disability, or death of a member of the uniformed services, except that any retired pay excluded under this subclause shall include retired pay paid under chapter 61 of title 10 only to the extent that such retired pay exceeds the amount of retired pay to which the debtor would otherwise be entitled if retired under any provision of title 10 other than chapter 61 of that title.⁴

Title 10 of the U.S. Code covers "Armed Forces," while chapter 61 addresses retirement and separation due to disability. Related, title 37 of the U.S. Code covers "Pay and Allowances of the Uniformed Services," and title 38 covers "Veterans Benefits."⁵ Because no specific benefits or beneficiaries, for example, are named in the new CMI exclusion, a substantial opportunity exists to protect a broad range of payments made under titles 10, 37 and 38 to a variety of recipients, including servicemembers, veterans and certain family members.⁶

Determining Whether the New CMI Exclusion Applies

Payments under titles 10 and 37 are paid primarily by the Department of Defense (DOD) through its Defense Finance and Accounting Service (DFAS), and payments under title 38 are paid by the Department of Veterans Affairs (VA). Payments from either department should be reviewed for potential excludability from CMI.⁷

Multiple payment types from the DOD and VA have similar names but are not paid under similar circumstances. Thus, it can be essential to determine the precise payment type at issue.⁸ Award letters, benefit-summary letters, benefit-payment histories, and leave and earnings statements are all potential sources of concrete information.⁹ Such documents are often readily available to servicemembers, veterans and other beneficiaries through federal websites.¹⁰

Although these documents typically state the payment type, they might lack information about the statutory authority for the payment. To aid practitioners, ABI's Task Force on Veterans and Servicemembers Affairs has prepared a chart listing relevant payment types, along with citations, descriptions and links to additional information.¹¹

In many cases, whether payments can be excluded from CMI will be clear. One example of a clearly apparent excluded payment is VA Disability Compensation paid monthly under title 38 to veterans who have a service-connected disability.¹² The same is true of VA Special Monthly Compensation, which is paid monthly under title 38 to those receiving VA Disability Compensation who also have special circumstances warranting additional compensation.¹³ Similarly, VA Dependency and Indemnity Compensation (DIC) — paid monthly under title 38 to eligible survivors after a servicemember's in-service or service-connected death or a veteran's death due to a service-connected disability (or circumstances that are equated as such) — also easily meets the conditions to be excluded from CMI.¹⁴

Interpreting the New CMI Exclusion

Although many cases will be clear, payments from DOD and VA could also fall into gray areas that require further analysis and potential advocacy before being excluded from CMI. Examples include disability retired pay, hostile fire pay/imminent danger pay (HFP/IDP) and VA Veterans Pension.

The new CMI definition limits the exclusion of "retired pay paid under chapter 61 of title 10" — i.e., disability retired pay, which is paid monthly upon a servicemember's temporary or permanent military retirement due to a disability.¹⁵ Specifically, the limiting language states that

any retired pay excluded ... shall include retired pay paid under chapter 61 of title 10 only to the extent that such retired pay exceeds the amount of retired pay to which the debtor would otherwise be entitled if retired under any provision of title 10 other than chapter 61 of that title.¹⁶

This language appears to be intended to prevent the exclusion of retired pay that could be received regardless of disability. After serving on active duty for 20 years, a servicemember is generally eligible to retire based on having served the typical minimum time necessary to qualify for retirement.¹⁷ This servicemember might have planned to continue serving, but due to a disabling condition, the servicemember is being retired under chapter 61. As described below, such a retirement...