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Filing for Bankruptcy for a Servicemember

Filing for Bankruptcy for a Servicemember

Perhaps you made a few bad financial decisions after you were deployed on your last tour. Perhaps expenses mounted up when you were forced to relocate to a new base, or after you were injured in the line of duty. Regardless, as a member of the Armed Forces, you may be finding yourself in a seemingly-impossible financial situation, and considering bankruptcy. If you’re an active-duty member of the military, a disabled veteran, or reservist or National Guard member called to active duty, filing for bankruptcy has aspects unique to military members, both good and, potentially, bad.

There May be Disciplinary Consequences for Failure to Pay Debts

First off, if you’re currently a servicemember and are letting your debts go unpaid, you should seek help from a local Lynchburg attorney as soon as possible. The Uniform Code of Military Justice requires that members of the military pay their debts in a timely manner, and threatens discipline against those who don’t.

You Cannot Be Discharged for Filing for Bankruptcy

Fortunately, if you’re unable to meet your financial obligations, you have a federal right to file for bankruptcy. Additionally, if debt collectors are currently contacting your commanding officer regarding your unpaid debts, then they will be forced to stop once you file for bankruptcy. Your Virginia bankruptcy attorney can help ensure that no further calls are made.

The Servicemembers’ Civil Relief Act Offers Special Protections to You

As an active duty member of the military or activated National Guard member, you are protected under a federal law called the Servicemember’s Civil Relief Act. Among other protections, this law entitles you to interest rates capped at 6% for loans you received before entering active duty, where you can show that your ability to pay that loan was affected when you entered active duty (i.e., your income was substantially reduced). A Virginia consumer and military law attorney can help you make such requests.

Disabled Veterans Are Exempted from the “Means Test”

If you do decide to file for bankruptcy, you may be permitted to forego the “means test,” which a court will normally conduct when an individual files for Chapter 7 bankruptcy. This test disqualifies from bankruptcy those with sufficient disposable income to pay back part of their debts. If you have been injured while serving in active duty or while performing a homeland defense activity, and your debts were largely accrued while you were on active duty, then you may be exempted from this test. To qualify, your disability must have been rated at 30% or more, or you were discharged from active duty because of an injury which was received or exacerbated while serving in the military.

Likewise, if you are a member of the National Guard or Reserves, and were called to active duty after September 11, 2001, for at least 90 days of service, you can be excluded from the means test while on active duty and for 540 days after that active duty service.

Your Security Clearance May Be Affected by a Bankruptcy Filing

Finally, filing for bankruptcy may have an impact on your current security clearance, which is a determination that will be made based on such facts as the reasons the debt was accrued and your job performance. That said, having large sums of debt can also cause you to have a reduced security clearance. You may want to enquire with your commanding officer about possible consequences to filing before doing so.

Balancing your job as a member of the military against financial pressures can feel challenging. Contact a skilled Campbell County military and consumer law attorney to determine your options. Call on Farmer Legal, PLLC to discuss your claims from anywhere in the region, including Madison Heights, Concord, Clifford, Rustburg, or Appomattox County. Call (804) 325-1441 for a free consultation.

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