All military personnel, active members and veterans alike, can file for bankruptcy, qualifying for the same bankruptcy protections as civilians can attain. The process can look different for those who have served in the military, however. Service members may qualify for additional benefits, but they can also have unique setbacks from the process. Before filing then, it is important to be aware of what this process entails for military personnel.
If you are a disabled veteran, then you might not have to pass the means test, which determines eligibility for Chapter 7 bankruptcy. This test measures one's income against the average income in the state; if the income is too high, then that person cannot get their debts discharged through Chapter 7. If you are a veteran who has at least a disability rated at 30 percent, or if you were discharged from service because of a disability sustained during active duty, then you may not have this barrier to qualifying. If the main bulk of your debts accumulated during your active duty, then you do not have to pass a means test to get Chapter 7 bankruptcy relief.
Other service members may be exempt from the means test as well. This includes members of the National Guard and reservists of the Armed Forces who were called to active duty for a minimum of 90 days after September 11, 2001. There would be no means testing if you file during active duty, and you would have a window of 540 days after your service within which you would not have to pass a means test to file for Chapter 7.
If you are a service member on active duty, then you have protections under the Servicemembers' Civil Relief Act (SCRA). Not only can this help in cases of eviction and foreclosure, but under this act, a judge can delay your bankruptcy process. What this means is that the automatic stay in your bankruptcy can last as long as a court deems is necessary. An automatic stay is what keeps creditors from collecting, foreclosure from processing, lawsuits from continuing, and more. This stay is only as powerful as it can be in place, and creditors have ways to remove this automatic stay. If a court decides that an automatic stay can last longer than the usual time allotted in a bankruptcy, then this can provide you with an immense amount of protection.
It is important to know that there are circumstances when filing for bankruptcy can endanger your security clearance. Bankruptcy on its own will not do this, but the reasons for the bankruptcy are one of the conditions that can influence your security clearance. That being said, if you have an enormous amount of debt to your name, this can be a reason that your security clearance is at risk. In this instance then, bankruptcy can benefit you, as it can clear this debt and put you on better financial footing. There are no set rules for how a bankruptcy would or would not affect your security clearance though. It is imperative that you ask about how your security clearance would be affected by your filing or not filing for bankruptcy.
This is only a brief overview of what bankruptcy proceedings can look like for military service members. If you have any questions, do not hesitate to consult an expert on the matter. Contact a bankruptcy attorney today to learn about your options when it comes to bankruptcy. A qualified lawyer can help you understand and protect your legal rights as you seek a stronger financial future.