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Military Service and Bankruptcy

On Behalf of | Dec 10, 2016 | Bankruptcy Basics

If you are on active military duty, a disabled veteran, or planning to enlist in the armed forces, you may be wondering how your military status may affect your bankruptcy. If you are a member of the armed forces, you have the same right to file for bankruptcy protection as a civilian. In fact, special exemptions apply to military bankruptcies that can help discharge debt that might not otherwise be eligible.

Bankruptcy for Disabled Veterans

Disabled veterans are given more bankruptcy protection than civilians. For example, in a Chapter 7 bankruptcy the filer would ordinarily have to meet certain income requirements called a “means test.” Disabled veterans, members of the National Guard, or reservists can be exempt from this requirement. If you are a disabled veteran with a qualified disability, you will not have to pass the means test if the debt was either incurred while on active duty or while performing duties related to homeland defense. Further, members of the National Guard or reservists are not subject to the means test if they were on active duty or performing duties related to homeland defense for a continuous period of at least 90 days and they file for bankruptcy within 18 months after active duty. Of course, certain conditions apply and a bankruptcy attorney will be best able to help you navigate the bankruptcy process to discover how your military status might help you obtain the greatest possible debt relief.

Bankruptcy for Active Duty Service Members

Active duty service members are protected by the Servicemembers’ Civil Relief Act (“SCRA”). This act grants active duty service members some protection from debt collection actions. The SCRA can also prevent or postpone foreclosures, garnishments, evictions, and bank attachments. Because of this act, certain actions that creditors might take during the bankruptcy process, like an objection to discharge or a post-bankruptcy eviction, are stayed.

What if I am planning to enlist?

If you are planning to enlist, you may be wondering how bankruptcy can affect your enlistment. Because enlistees must meet certain financial requirements, there are situations where a bankruptcy can either help or hurt in the enlistment process. Each branch of the service has its own financial guidelines, but all branches will look at your financial history to determine your ability to responsibly pay debt and live within your means. This means that a bankruptcy can help your application when it reduces debt to a manageable level and allows you to begin rebuilding your credit history.

If you are active duty military, a veteran, or a person considering enlisting and are struggling with debt, we can help. Our attorneys help clients throughout New Jersey take the steps necessary to reclaim control over their finances. Now is the time to schedule a free initial consultation at Levitt & Slafkes, P.C. to see what our attorneys can do to give you a fresh financial start. Contact our attorneys online by filling out the form or by calling 973-323-2953 to schedule a free initial consultation.