Yes they do (most of the time).
When you file bankruptcy, we run your income on a “current monthly income and means test” form called Form 122A (in the old days just “Form 22”). If you make too much money, you cannot file a simple chapter 7, and you are stuck in a chapter 13 on a repayment plan to your creditors.
When we run the calculations, we count W2 income, alimony, pension, and a host of other types of income. However, we don’t count some government benefits, like SSA. Just today, I had another bankruptcy attorney call me today and ask if he had to count his client’s VA benefits on the analysis, and the answer is a resounding, “YES!”
That being said, we don’t count VA Disability Income if you are
a disabled veteran as defined in 38 U.S.C. § 3741(1)) whose indebtedness occurred primarily during a period in which I was on active duty (as defined in 10 U.S.C. § 101(d)(1)) or while I was performing a homeland defense activity (as defined in 32 U.S.C. §901(1)).
See “Statement of Exemption from Presumption of Abuse.” So, if you incurred the debts while on active duty and are now disabled, then we don’t have to count the VA Disability Income.
I need to give credit where credit is due. I did a little research, and out of 5 articles I read, this one gave me the best starting point: http://dworniklawaz.com/va-disability-income-bankruptcy-means-test/. My thanks to Richard M. Dwornik at Dwornik law.