Bankruptcy Exceptions for Active and Veteran Military Members

People serving the armed forces sacrifice a great deal for their country, often at their own expense. Provisions of the bankruptcy code as well as other federal laws are in place to assist veterans and active service members with getting through tough financial times. The U.S. Bankruptcy Code includes special exceptions, some of which apply to active military members and some to veterans.

One exception for veterans is that they may be spared from having to take the bankruptcy means test, which determines an individual’s qualification to file for Chapter 7 bankruptcy. Disabled veterans are exempt from the means test if they incurred the debt at issue while on active duty or while performing duties related to homeland defense. The veteran needs to have a disability rating of at least 30 percent or they must have been discharged from active duty due to a disability they suffered in the line of duty.

Another exception relates to veteran benefits. These are exempt from the debtor’s estate in a Chapter 7 proceeding, which means creditors cannot touch them. Also, if a veteran is required to file a Chapter 13 bankruptcy. the benefits will not be considered when a repayment plan is calculated.

In addition, veterans who have served in a recognized combat zone are not required to take the otherwise-mandatory credit counseling course before filing for bankruptcy.

The Servicemembers Civil Relief Act of 2003 (SRCA) provides protections for active service members who are filing for bankruptcy. Several aspects of a bankruptcy case can be postponed for a period of 90 days, which has the effect of prolonging the automatic stay that takes effect when a bankruptcy case is filed. These service members can also be exempted from pre-bankruptcy credit counseling. The SRCA also protects active service military members from foreclosures, evictions, wage garnishments, default judgements and bank attachments.

Despite the fears of some service members, filing for bankruptcy will not impact their security clearance or their standing in the military generally. On the other hand, certain types of debts, such as those related to gambling, are more likely to cause concern for military superiors. Filing for bankruptcy may be seen as a way to deal responsibly with debt issues and to make a fresh start.

Jeff Field & Associates assists active military service members and veterans with filing Chapter 7 and Chapter 13 bankruptcy cases in Georgia. We have locations in Bogart, Douglasville, Gainesville, Lawrenceville, Marietta and Decatur. Contact us at 404-381-1278 or contact us online to schedule your free initial consultation.