Members of the military, current, and veteran, have sacrificed a lot for their country. Unfortunately, economic hardship is often a consequence of those sacrifices.

The federal government understands this consequence. Lawmakers have instituted laws to help military members certain debt collection actions.

The Servicemembers’ Civil Relief Act (SCRA) provides some protections to active-duty military dealing with debt collection. The SCRA delays or prevents collection action such as:

  • foreclosures and evictions
  • wage garnishments
  • default judgments
  • bank attachments

The SCRA also provides added protection for active-duty servicemembers while in bankruptcy.

Bankruptcy Exceptions for Active Military Members

In all bankruptcy proceedings, an injunction called the automatic stay goes into effect as soon as a bankruptcy petition is filed. The automatic stay restricts creditors from taking debt collection actions against the debtor for the duration of the bankruptcy case.

Under the SCRA, bankruptcy courts may postpone bankruptcy proceedings involving military personnel on active duty for periods of 90 days or more. This postponement could prolong the bankruptcy case. Thus, making the automatic stay against debt collections last longer.

Also, active-duty military members serving in a combat zone can get exempted from taking the pre-bankruptcy credit counseling other debtors must take before filing bankruptcy.

Many active-duty men military members may fear filing bankruptcy will adversely affect their security clearance. In most cases, filing bankruptcy will not affect military security clearance. In fact, it may help to show that a servicemember has taking care of their outstanding debts.

Bankruptcy Exceptions for Veteran Military Members

To qualify for Chapter 7 bankruptcy, most debtors need to pass a means test. The means test looks at a debtor’s income verses. expenses to determine their disposable income. If the debtor has a high disposable income, they do not qualify for Chapter 7 straight bankruptcy.

Disabled veterans can receive an exemption from taking the means test. To qualify for the means test exemption a disabled veteran must meet the following qualifications:

  • incurred the debt they want to discharge during active duty
  •  or while performing duties of homeland defense
  • and have a disability rated 30% or more under veteran disability compensation rules
  •  or received a discharge from active duty because of a disability in the line of duty

Getting Help Filing Bankruptcy as an Active or Veteran Military Member

Bankruptcy can help military members struggling financially get a fresh start. But, bankruptcy has many rules and regulations and each can apply differently to a debtor’s financial circumstances.

Understanding how the bankruptcy rules and the exceptions for military members may apply to you can be difficult. You would benefit from the help of an experienced bankruptcy attorney.

Brock & Stout is a veteran-owned law firm with over 25 years of experience helping military members and their families file bankruptcy. Contact us for a free evaluation to see if our family can help your family get a fresh financial start.