When you joined the armed forces, you knew you were in for some hard work and a long-term commitment. You may not have realized, though, how expensive life can be. If you have medical bills, credit card debt, car loans or other expenses you cannot pay, you may be thinking about filing for either Chapter 7 or Chapter 13 bankruptcy protection.
Before declaring bankruptcy, you should be certain you understand its drawbacks. For example, bankruptcy may interfere with your ability to obtain a security clearance. Nonetheless, if bankruptcy is the right course of action for you, the Servicemembers Civil Relief Act may provide you with some immediate benefits.
Benefits for active-duty servicemembers
When you are serving your country, you should not have to worry about your personal finances. If you are on active duty, you can likely postpone your bankruptcy filing until your deployment ends. In fact, the SCRA stops bankruptcy proceedings until 90 days after you return home.
Furthermore, if you are serving in a combat zone, you likely do not have to go through mandated credit counseling before seeking bankruptcy protection. This perk may save you both effort and money. It may also allow you to start the bankruptcy process sooner than you may expect.
Benefits for disabled veterans
Before most individuals file for Chapter 7 bankruptcy protection, they must complete a means test. This test, which determines bankruptcy eligibility, measures whether you have enough assets to pay some of your debts.
If you are a disabled veteran, you may not have to comply with the means test. For this exemption to apply, though, you must have acquired most of your debt during your military service. You must also have at least a 30% disability rating or a disability-related military discharge.
While federal law provides some clear bankruptcy benefits for disabled veterans and other members of the armed forces, you should make sure you make an informed decision to file. Nevertheless, by taking control of your current debt, you build the foundation for a strong financial future.