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Bankruptcy Law Blog

Monday, February 25, 2019

Filing For Bankruptcy If You Are Or Were In The Military

Military members receive many legal protections while they are serving our country, and after they have been discharged from active service. This includes special treatment in the bankruptcy courts.

More Expansive Stays

One of the benefits of filing for bankruptcy, no matter what your occupation, is that other legal actions are paused by the court while the bankruptcy case proceeds. This can stop a foreclosure, or even prevent someone from suing you.

Active-duty military personnel get the added benefit of having all pending litigation, including bankruptcy cases put on hold until you return from active duty. This extremely broad and powerful legal pause button is one of the main benefits provided by the Servicemembers’ Civil Relief Act (SCRA).

Automatic Access to Chapter 7

There are two main chapters of the bankruptcy code that individuals and families can file under — Chapter 7 and Chapter 13.

Chapter 7 is what most people think about when they think about bankruptcy. It is the chapter that allows you to have almost all of your debts forgiven right away.

Chapter 13 is more about repaying debts that forgiving them. It gives debtors a 3-5 year period to get caught back up on payments.

A few years ago, Congress thought too many people were filing under Chapter 7, so it made a new law that pushes people to file under Chapter 13 unless they can pass what is called a means test. The means test is supposed to determine if you have the means or money to repay your debts.

However, if you are a disabled veteran and your debts were incurred primarily while you were on active duty or performing a homeland defense activity, you are not required to complete the means test to qualify for Chapter 7 bankruptcy.

A Military-Specific Downside To Filing For Bankruptcy

It is well known that filing for bankruptcy takes a massive toll on your credit score, which can make it difficult to get loans in the future. Some people may even have trouble finding work after filing for bankruptcy because certain employers run credit checks on their job applicants.

Military members should be aware that filing for bankruptcy may impact their ability to get a security clearance in the future. The government does not like to share sensitive information with anyone who may be blackmailed over their financial history, or enticed to sell information for quick cash.

This is a gray area though. Some people’s careers are helped when they file for bankruptcy because it shows they are owning their mistakes and making a step towards improving the situation they are in.

Know Your Options

If you are on active duty, and you are considering filing for bankruptcy, you should also investigate whether there is a free financial consultant on your base. Many bases are now employing financial consultants to advise people stationed their who are in financial distress.

If you are determined to file for bankruptcy, don’t hesitate to contact our office. We have years of experience helping service members and veterans navigate the bankruptcy system.

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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”