Military Veteran’s Bonus Repayment Demands are Dischargeable in Bankruptcy


You served your country. You agreed to re-enlist based on the offer of a bonus. You gave up time with family and risked your life based on the payment of a reenlistment bonus from your government. All of you lost precious time. That time can never be given back to you.

Some of you had your lives altered because of injuries, both physical and/or mental from your service. I know what that is like. My son is a Marine that served in Iraq. He now lives with PTSD and physical

MILITARY VETERAN’S BONUS REPAYMENT IN BANKRUPTCYinjuries, including traumatic brain injury from an IED explosion. (I won’t get started in my opinion of the VA at this time.) Some gave the ultimate sacrifice for our country.

You kept your end of the bargain. You performed honorably. Now your government is demanding that you repay money that it agreed to pay you for your service. This is an outrage. An even worse outrage is paying this money “back” to the government. It is not theirs. You earned it. You paid for it with your own blood. It is yours.

If you have any doubt of that, look at your tax return. You paid income tax for this money to the same government that I know veterans have refinanced their homes, sold their things, did without things they needed for themselves and their families. All that to pay back something that they shouldn’t and didn’t owe.

How to Get Rid of Military Veteran’s Bonus Repayment Demands

No one, other than the government, can give you what you deserve. They certainly are not going to do so without a major battle and legislation to remedy this abuse. However, there are options beyond rolling over and giving the money back. One of those options is that 10 letter word “bankruptcy.” I know. Don’t groan and turn off. You need to know that there are laws that are there to help you when the government refuses to do right by you.

Bankruptcy wipes out all debts other than those that are specifically listed in 11 U.S.C. §523 of the Bankruptcy Code. There are the common things you would expect. Things like most taxes, support obligations, court ordered divorce obligations, and bad actions like fraud, theft, damages from driving under the influence or intentional physical injury to others for example.

What is more important to you is what is NOT listed in §523. Nothing in §523 denies you the ability to discharge the overpayment of the bonus money. Simply put, if you qualify to file bankruptcy, that debt can be wiped out. That includes the debt and all the interest that has accrued over almost 10 years. This is not in question. If you file bankruptcy, the debt is gone. Period. No “ifs” “ands” or “buts.”

Outside of bankruptcy, the government apparently take pretty much what they want. (Slight exaggeration but not by much.) They have the ability to offset the debt against future benefits. However, bankruptcy trumps their rights completely.

Military Veteran’s Repayment Demands Compared to Social Security Disability Payments

As an example, if someone gets an overpayment of Social Security disability payments, Social Security can offset that overpayment against future benefit payments. If the debtor files bankruptcy, that debt is eliminated. Case law on this issue holds that the Social Security Administration cannot withhold future benefits that are due by right to the debtor to pay a discharged debt.

As far as I can tell, there are no cases as to post bankruptcy benefit offsets. In comparing the issues, I see no basis for the same rules as to Social Security overpayment not applying to the bonus overpayment. Future payments or benefits cannot be held hostage to past debts that are discharged in bankruptcy.

What is 100%: The bonus debt overpayment is dischargeable.

What is not 100% certain, but may also be the case: The overpayment may not be able to be offset against future benefit payments.

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