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I Am in the Military and Am Considering Filing for Bankruptcy. How Does Being in the Military Affect My Bankruptcy?

Fortunately for you, military personnel have the same rights to file bankruptcy as civilians. Some members of the military get even better options when it comes to filing for bankruptcy. The Servicemembers’ Civil Relief Act (SCRA) gives active-duty military personnel some additional legal protections in a bankruptcy. The SCRA gives courts the right to postpone bankruptcy proceedings while the individuals are on active duty.

In addition, being in the military may help some people avoid bankruptcy entirely. Under the SCRA, many active duty personnel are entitled to a cap of 6% on the interest rate on many debts or financial obligations, except for some student loans. In order to qualify for the reduced interest rate, the military member must have taken out the loan before beginning active duty. Also, the individual must show that he or she makes less money in the military than before going on active duty. In order to receive the rate reduction, the serviceperson must write a letter to the lender asking that the interest rate on the loan be changed.

Therefore, if you are on active duty, and you have some debts that you are struggling with, you may be entitled to have the interest rate on those debts reduced. That can help a great deal in paying off some of the principal on your high interest rate debts, and could help avoid bankruptcy entirely, or at least postpone it.

Disabled veterans may also qualify for special treatment under the SCRA. Normally, in order to qualify for a Chapter 7 bankruptcy, service members must pass a means test. It was created in order to disqualify debtors from discharging their debts if they have enough income to pay back the debts. However, disabled veterans who incurred their debts primarily while on active duty are not required to pass a means test in order to file for bankruptcy. In order to be considered a disabled veteran, a person must have a disability of 30 percent or more or be discharged from active duty because of a disability suffered in the line of duty.

Members of the National Guard or the reserves who are called to active duty for at least 90 days also do not have to meet the means test when filing for a Chapter 7 bankruptcy while they are on active duty, and for 540 days afterwards. The exclusion is only temporary, however, and if a reservist does not meet the time requirements, he or she must meet the means test when filing for a Chapter 7 bankruptcy.

One thing to consider before filing for bankruptcy as a member of the military is that a bankruptcy could affect a person’s security clearance. However, having a large amount of outstanding debt can also affect the security clearance. Before filing for bankruptcy, a serviceperson should speak to someone in the military about the clearance.

If you are in the military and are considering filing for bankruptcy, call the Atlanta bankruptcy attorneys at Holston & Huntley. Call us today- consultations are free and you are under no obligation to use our services. We serve Metro Atlanta Georgia as well as Birmingham Alabama including surrounding areas.

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