When you are in the military, you are not barred from filing for bankruptcy,
though there may be some implications on your future career path if you
do choose to file. Most commonly some servicemembers are concerned about
how their security clearance will be effected if they choose to pursue
bankruptcy. Despite some of the obstacles bankruptcy can create, there
are also many exemptions that are offered to veterans and other servicemembers.
The best approach to your bankruptcy filing as a military member is to
consult with a bankruptcy lawyer who can inform you of your rights, your
options, and the strongest plan for your situation.
Security Clearance & Bankruptcy Filings
While many members of the military who are seeking to advance their level
are worried about the implications of bankruptcy on this goal, it is important
to understand that filing alone will not be a disqualifier for retaining
or gaining security clearance.
When an individual is behind or delinquent on their debt, they risk losing
their clearance due to their financial vulnerability. Furthermore, the
nature of the debts will also play into how security clearance is impacted.
For example, if the debts were gained through excessive gambling or luxury
activity, it would be seen as much more negative. However, bankruptcy
can eliminate these debts, show a form of responsibility, and give a person
a clean slate to start over with. Once the debts are gone, they will likely
not be seen as vulnerable or risky.
Exemptions Available for Military Members
Overall, bankruptcy can be a very positive tool for those struggling to
overcome their financial obstacles. Especially for the brave men and women
that serve our country, staying on top of bills and debts at home can
be extremely challenging. That is why there are certain exemptions and
exclusions provided to qualifying military members.
For example, if you are a disabled veteran, you will not have to pass the
means test to file for
Chapter 7 if most of your debts were incurred during active duty or while you were
performing services connected to homeland defense. In addition to that,
veteran benefits are viewed as exempt as assets in many cases.
There is also a National Guard or Reservist exemption that allows members to opt of
the means test under the National Guard and Reservist Relief Act.
They must meet the following requirements:
- On active duty or serving homeland defense for a consecutive period of
at least 90 days; and
- Filed for bankruptcy within 18 months of leaving active duty.
Keep in mind that this military exemption is slated to expire in December
2015, though it may still be extended.
Another key act is the Servicemembers Civil Relief Act, which provides
pre-bankruptcy relief as well as protection during the filing process.
When you file, this act can help safeguard you from objections to debt
discharges, collections, evictions, and other
creditor actions.
Find Out if Bankruptcy is Right for You
In general, bankruptcy will not negatively affect your current military
status so long as you follow the process and move forward from your debts
in the future. Your Command will likely not be notified of your filing,
nor will filing impact your eligibility to remain in the military.
If you would like to find out more about filing for bankruptcy while in
the military,
call on our Phoenix bankruptcy lawyer for counsel.