If you're currently serving or have served in the military, you know that you're expected to uphold a higher standard of living than your civilian counterparts. Sometimes, life takes unexpected turns that may leave you in a less than the ideal financial situation. Nobody goes through life thinking they may someday file for bankruptcy, but doing so can give you the fresh financial start you need to move forward. Here's what you need to know about filing for bankruptcy while in the military:
Filing for Bankruptcy in the Military
There are no legal restrictions that prevent military personal from filing for bankruptcy. While serving in the military, you have the same rights as a regular civilian to file for bankruptcy protection. When you join the military, there's an expectation of you to maintain a decent standard of living. However, this doesn't mean that you're immune to financial hardships.
Members of the military are often afraid of filing for bankruptcy because they are worried that it will interfere with their service or ruin their reputation. The reality is that you'll be better off if you can maintain a strong financial situation. In fact, the military prefers that your finances be in order – even if that means filing for bankruptcy. Filing for bankruptcy can give you the opportunity to get back on your feet and can give you a fresh financial start.
Servicemember's Civil Relief Act
The Servicemember's Civil Relief Act (SCRA) offers special protections when a member of the military files for Chapter 7 or Chapter 13 bankruptcy. These laws were put into place to help active military members focus on their duties rather than their financial situation. The SCTA gives courts the right to stay or postpone bankruptcy and non-bankruptcy proceedings while you are on active duty. The law is able to prevent a range of proceedings during the bankruptcy process that could be detrimental to members of the military such as default judgments related to the dischargeability of a debt, obligation discharge objections, debtor examinations and collection actions that may occur after the bankruptcy proceedings have finished.
Special Protections and Exemptions
When civilians wish to file for Chapter 7 bankruptcy, they must pass the means test. The means test determines whether a debtor's income is low enough to file for Chapter 7 bankruptcy. However, if you're a disabled veteran, you may be exempt from passing the means test if your debts were mostly incurred during active duty or while performing activities related to homeland defense.
If you're a member of the National Guard or a reserve unit of the Armed Forces and were called to active duty or performed a homeland defense activity for at least 90 days after September 11, 2001, you may also be excluded from Chapter 7 means testing requirements. An experienced bankruptcy attorney will be able to help you determine whether you qualify for these special protections and exemptions.
Filing for Bankruptcy May Affect Security Clearance
Filing for bankruptcy doesn't automatically affect your security clearance. Whether your security clearance is affected depends on a number of factors including why you filed for bankruptcy, your job performance, your position in the military and more. Having large amounts of debt may affect your security clearance, but in some cases, filing for bankruptcy can help you because it shows you're taking a step in the right direction. However, in order to see classified information, you will have to obtain high-level security clearances that require extensive background checks. Unfortunately, this could mean that bankruptcy will have a negative impact on your ability to work in these positions.
If you're serving in the military and are considering filing for bankruptcy, the best thing you can do is to meet with an experienced bankruptcy attorney. There are special protections and exemptions that exist for military personnel who are facing bankruptcy, and a bankruptcy attorney will be able to explain these to you.